Swedish automaker Volvo Cars announced on Wednesday that its quarterly profit decline was less severe than anticipated, benefiting from cost-saving measures that offset challenging market conditions. However, the company noted that negative impacts from the reduction of U.S. subsidies and other developments were worse than expected.
The company, majority-owned by China's Geely Auto, saw its shares rise 1% in early trading, narrowing its year-to-date decline to 25%.
"We are not satisfied with the performance... but despite external factors leading to lower sales, our profitability has remained largely stable... I believe this fully reflects the company's excellent internal management of controllable factors," said CEO Håkan Samuelsson.
Volvo Cars had previously warned that tariff-related costs, currency effects, intense competition, and geopolitical tensions would negatively affect profits.
The company stated that profitability would continue to face headwinds in the second quarter, compounded by the production ramp-up of its new electric EX60 model, which began last week at its Gothenburg plant.
"Of course, we hope for an improvement in the external market environment, but in the second half of the year, we will focus on returning to growth," Samuelsson said.
First-quarter operating profit was 1.6 billion Swedish kronor ($172 million), down from 1.9 billion kronor a year earlier, with sales declining by 11% and a gross margin of 18.5%. Analysts from Svenska Handelsbanken, Bernstein, and J.P. Morgan noted that the profit decline was smaller than expected, as market consensus had projected a drop to between 900 million and 950 million kronor.
Volvo Cars indicated that a cost-cutting plan launched a year ago, along with its ability to maintain market share in Europe's premium segment, supported its profits.
However, Samuelsson noted that the U.S. market was more severely impacted than anticipated, as the removal of the key $7,500 electric vehicle tax credit affected not only its fully electric models but also plug-in hybrid vehicles. Volvo Cars reaffirmed its goal of increasing full-year group sales.
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