Volvo cuts full-year sales forecast citing Chinese EV tariffs

STOCKHOLM -- Volvo Cars beat second-quarter operating earnings estimates but lowered its full-year retail sales forecast citing the impact of European tariffs on Chinese-made electric cars, the automaker said in a statement.

The company has been caught in the crossfire of the the EU's spat with Beijing over subsidies for its EV makers. Owned by China’s Geely, Volvo makes electric models in the country and may be hit with tariffs.

The European Union this month announced tariffs of up to 37.6 percent on EV imports from China, which is expected to dent demand for the powertrain further.

Brussels has until autumn to make a final decision on the tariffs, which are preliminary for now.

While Volvo has been benefiting from robust demand for its China-made EX30 small SUV, which is Europe's No. 3-selling EV after the Tesla Model Y and Model 3, rising trade barriers have slowed its expansion.

Last month, the automaker said it would postpone U.S. shipments of the model after Washington imposed a duty of more than 100 percent on Chinese EV imports.

In a move expected to circumvent U.S. and EU tariffs, the company will start producing the compact SUV at its plant in Ghent, Belgium, the first half of next year.

Volvo in June started U.S. production of its flagship electric EX90 SUV near Charleston, South Carolina, with first customer deliveries scheduled for the third quarter.

Automakers and suppliers have for years bet on rising demand for EVs, but slowing sales now mean investment in capacity and technology are outpacing demand.

While Volvo has like others reported upbeat EV sales of late, the company lower its forecast for sales growth this year to 12 to 15 percent from 15 percent, on July 18.

"We wanted to put a floor on that for the markets to say we are still going to grow but there are some headwinds," CEO Jim Rowan told Reuters. "It's really driven by tariffs."

Volvo produced 211,900 cars in the second quarter, more than they sold, as demand for EVs in Europe has dropped.

Earnings

The Swedish automaker's operating income, which includes its stake in money-losing Polestar, rose to 8 billion crowns ($758 million) from 5 billion crowns a year earlier.

That topped the 6.7 billion crowns expected by analysts, LSEG data showed.

Operating income excluding joint ventures and associates rose to 8.2 billion crowns from 6.4 billion crowns.

The company's EV gross margin rose to 20 percent from 16 percent in the previous quarter underpinning the CEO's assertion that margins would continue to rise.

Bloomberg and Douglas A. Bolduc contributed to this report