How U.S. Tariffs and EV Delays Caused a 64% Profit Crash at Volvo
It’s been a tough quarter for Volvo Cars. The Swedish automaker just announced its second-quarter 2025 financial results, revealing a significant 64% drop in its adjusted operating profit compared to last year.
So, what’s behind the sudden downturn? The company is navigating a perfect storm of challenges, primarily driven by hefty U.S. import tariffs on its China-built cars and costly delays in launching its flagship electric vehicles. Let's break down what happened.
1. A Closer Look at the Numbers
In the second quarter of 2025, Volvo's adjusted operating profit fell to 2.9 billion Swedish Krona (SEK) from 8.0 billion SEK during the same period last year.
But the story gets more dramatic when you factor in one-time charges. Including costs related to restructuring and devaluing certain assets, the company swung from a net profit of 5.35 billion SEK in Q2 2024 to a net loss of 7.51 billion SEK this quarter. This shift highlights the major financial adjustments Volvo was forced to make.
2. The Tariff Trouble
A major blow came from U.S. trade policy. As of April 1, 2025, the U.S. government imposed an additional 25% tariff on cars imported from China, on top of an existing 2.5% duty. This had an immediate and severe impact on Volvo's business.
ES90 Sales Halted
The new tariff made it unprofitable for Volvo to export its China-made ES90 luxury sedan to the United States. As a result, the company had to pause sales of the model in one of its key markets.
Squeezed Margins on the EX90
The tariffs also hurt the profitability of the new EX90 electric SUV in both the U.S. and Europe. Because the vehicle relies on key components sourced from Europe and China, its complex supply chain became a major financial vulnerability.
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| Volvo ES90 (source) |
3. EV Growing Pains: Delays and Write-Downs
Compounding the tariff issue were internal delays with the launch of the highly anticipated EX90 and ES90 electric models. These delays, combined with tariff-related cost increases, forced Volvo to take a significant one-time, non-cash "impairment charge" of 11.4 billion SEK (approximately 1.2 billion USD).
In simple terms, Volvo had to officially write down the expected future value of these vehicle platforms. The company acknowledged that due to the launch delays and higher costs, these models are now projected to be less profitable over their lifecycle than originally planned. This massive write-down was recorded partly against the cost of building the cars and partly against research and development expenses.
4. A Snapshot of the Financials
Here's a quick comparison of Volvo's key financial metrics for the second quarter:
| Metric | Q2 2025 | Q2 2024 |
|---|---|---|
| Adjusted Operating Profit | SEK 2.9 billion | SEK 8.0 billion |
| Operating Profit Margin (adj.) | 3.1% | 8.6% |
| Net Profit / (Loss) | (SEK 7.51 billion) | SEK 5.35 billion |
| Revenue | SEK 93.49 billion | Not disclosed |
| Impairment Charge on EV Platforms | SEK 11.4 billion | SEK 0 |
5. What's Next for Volvo?
Despite these setbacks, Volvo insists it remains committed to its long-term electrification strategy. The company is already taking steps to adapt to this new reality.
Focus on Cost-Efficient Production
Production of the mid-sized EX60 is set to begin at its Swedish plant in 2026. This model will leverage new manufacturing techniques like "mega-casting" and "cell-to-body" battery integration, which are designed to lower costs and improve efficiency.
Shifting Production to the U.S.
To shield itself from future tariffs, Volvo will begin building its popular XC60 model in South Carolina starting in late 2026. This move will allow the company to better serve the North American market directly, without the risk of import duties on China-built vehicles.
Conclusion
Volvo’s difficult second quarter was the result of a one-two punch: external trade barriers and internal production challenges. While the U.S. tariffs have disrupted the profitability of its key models, the company is not standing still. The significant write-downs and revised production plans show a clear pivot toward a more tariff-resilient manufacturing footprint and next-generation EV architectures.
For Volvo, successfully executing this shift to more localized, cost-efficient production will be critical to restoring its profit margins and achieving its ambitious long-term goals in the electric era.