Volvo Car AB reported fourth-quarter 2025 revenue of SEK 94.4 billion, down from SEK 112.1 billion in the year-ago quarter, as U.S. import tariffs and weaker pricing weighed on sales. Operating income fell to SEK 1.9 billion from SEK 3.9 billion a year earlier, while operating income excluding items affecting comparability plunged 68% to SEK 1.8 billion (down from SEK 5.6 billion). The Q4 EBIT margin contracted to 2.0% (3.4% in Q4 2024) and 1.9% excluding one-offs (5.0% in Q4 2024). Basic earnings per share were SEK 0.43 versus SEK 0.84 in Q4 2024, and free cash flow fell to SEK 8.8 billion from SEK 13.6 billion in the prior year quarter.

Management cited the imposition of EU-U.S. import tariffs, a stronger Swedish krona and removal of U.S. EV incentives as key drags on revenue. Wholesale volumes declined as price reductions were required to stimulate demand in key markets, particularly North America and Europe. Tariff costs alone are estimated to have reduced quarterly revenue by more than SEK 5 billion, while currency translation effects subtracted roughly SEK 2 billion from reported sales.

Despite the challenging backdrop, fully electric vehicles accounted for 24% of Q4 sales (up from 21% in Q4 2024) and hybrid models represented 49% of deliveries (versus 47% a year earlier). Retail orders for fully electric models strengthened for three consecutive months through December. In China, Volvo increased its share of the premium segment, led by strong demand for the XC70 long-range plug-in hybrid SUV. The company unveiled the new EX60 mid-size electric SUV, reporting “overwhelmingly positive” initial customer response and strong order intake ahead of second-half 2026 deliveries.

Volvo’s SEK 18 billion cost and cash action plan delivered a new lower cost base and positive quarterly free cash flow, while full-year 2025 free cash flow was SEK 2.4 billion despite external pressures. The company aims to secure an additional SEK 5 billion ($556 million) in cost savings in 2026, targeting long-term EBIT margins above 8% and stronger cash generation. Management expects the premium market to shrink this year, with continued pricing pressure, tariff effects and softer consumer sentiment. Volvo plans further reductions in variable and indirect costs, temporary inventory build-up for popular XC90 and XC60 models and a return to volume growth by year end, with free cash flow exceeding 2025 levels.