Volvo Cars profit warning - why?
The direct reason is that China sales plummet by 40 percent in the third quarter. This is evident in the latest sales figures which were presented at the same time as the warning on Friday morning. The loss is expected to hit volumes and cash flow for the full year 2026 hard. Forecasts for the rest of the year are also scrapped.
The situation in China is serious. As late as 2022, China accounted for just over one in four Volvos – which has now dropped to one in seven. At the same time, the recovery in South and North America has been slower than expected. In total, sales are down by 10 percent.
The Chinese market has indeed lost around 20 percent in the past year - but Volvo is thus losing twice as much. This despite the new China-adapted plug-in hybrid, with a name XC70 familiar to many Swedes. But even that has recently lost momentum, despite big discounts.
In China, Volvo has, simply put, got caught up in a technology and price shift. Old gasoline-based bestsellers such as the XC60 SUV and the S60 and S90 sedans are plummeting in sales as Chinese buyers switch from gasoline to advanced electric cars and plug-in hybrids. At the same time, BMW, Mercedes and Audi are pushing prices in China - in a desperate attempt to maintain volumes. Above all, an epochal change is taking place in China: Chinese car buyers are increasingly choosing cheaper domestic brands with better software.
Wouldn't the new electric car – the EX60 – save Volvo?
Yes, but the production of the new electric SUV in Gothenburg has had difficulty getting started. When CEO Håkan Samuelssons presented the half-year results in mid-July with a profit margin of a paltry 1.1 percent (far from the company's 8 percent target), his message was simple: Autumn would be saved by the new EX60. He said that Volvo's total sales would increase by 10 percent in the second half of the year.
But so far it has only bitten a thumb: in Sweden, only 317 copies of the EX60 have been registered up to and including September according to Car.info. A large part are demonstration and company cars. The actual customer deliveries only started in mid-July and are still few.
It can also be noted that the profit warning comes at a time when Volvo has gotten over a hump in model investments, plowed down enormous sums into new electric cars, saved 18 billion and cut another five billion prematurely.
It should be harvest time.
But not.
This is reflected in Volvo Car's share price - where market analysts are constantly predicting the future: the share fell over 4 percent on Friday morning. It has fallen over 50 percent so far this year and a whopping 77.5 percent since the stock market bell rang almost five years ago.
But Volvo Cars is not alone in having a crisis. German BMW, Mercedes and Volkswagen's profit margins have more than halved in the last 3-4 years. Here, too, the Chinese market is the root of evil. The German companies have not presented their sales for the third quarter, but according to the official CPCA sales statistics in China, Volkswagen lost 38 percent, BMW 28 and locally produced Mercedes 19 percent in the first two months of the quarter, July and August.
Volvo's problems are thus part of a much larger European car crisis. In Germany alone, over 100,000 jobs in the automotive industry have disappeared since 2019.
Moving forward then - should Volvo Cars fire employees?
I asked Volvo's press department and the answer is in short: not now, at least not what the company wants to say. Verbatim, it wrote in an email: "We have no news to announce regarding cutbacks. Like all companies, we are continuously reviewing our operations and our cost base to improve efficiency and competitiveness."
On October 23, Volvo Cars reports for the third quarter. Then we will know how bad it actually looks.
