Volvo Cars aims to retain premium pricing as US tariffs pile on pressure

By Marie Mannes

STOCKHOLM, April 29 (Reuters) – Volvo Cars said on Wednesday that it had underestimated the impact of scrapped U.S. EV subsidies, but cost savings had helped contain a drop in first-quarter earnings squeezed by price pressure and tariffs. 

Like other European carmakers, Volvo Cars has endured a year of rising tariffs, adverse currency moves and geopolitical shifts, leaving its shares languishing near record lows.

While demand in Europe held up, first-quarter sales in the United States fell 32% and were down 17% in China year-on-year.

U.S. President Donald Trump removed an electric vehicle tax credit in late September, a shift automakers say risks stalling the country’s EV transition. 

CEO Hakan Samuelsson said the impact had been particularly severe because plug-in hybrids, which make up a large share of Volvo’s U.S. sales, had been eligible for the subsidy.

“We underestimated the effect… Customers got $7,500 also when they bought our plug-in hybrids. So we sold a lot of plug-in hybrids…and that has gone down drastically,” Samuelsson told Reuters.

Volvo’s U.S. plug-in hybrid sales fell 49% in the first quarter, while its EV sales were down 14%.

Price pressure was also coming from rivals with localised U.S. production but Chief Commercial Officer Erik Severinson said the automaker was confident about keeping its premium pricing despite that coming at the cost of volume. 

Apart from the EX90, the company imports its vehicles for the U.S. market from Europe.

“We feel that we have right strategy, but we need to be a little bit more careful around protecting our margins rather than jumping into the discount boat and trailing the rest of the industry to the bottom,” Severinson told Reuters.

The carmaker plans to begin producing its best-selling hybrid, the XC60, at its South Carolina plant later this year, followed by a plug-in hybrid towards the end of the decade.

First-quarter operating profit fell 16% to 1.6 billion Swedish crowns ($172.6 million) as sales fell 11%, but analysts said an 18 billion crown cost-cutting program launched a year ago meant the profit drop was less than expected.  

Volvo said second-quarter profitability would continue to face headwinds, as it ramps up production of its new electric EX60 but that growth could come in the second half of the year. 

Shares of the company, which is majority-owned by China’s Geely Holding, reversed an earlier 1% rise to stand 2.4% lower at 1227 GMT.

($1 = 9.2697 Swedish crowns)

(Reporting by Marie Mannes, Editing by Thomas Derpinghaus, Kirsten Donovan)