Volvo expects profits to recover in the second half of 2026 despite mounting headwinds tied to the Iran conflict and a sharper-than-expected slowdown in China.
The details: The automaker issued the outlook Friday, acknowledging that weakness in China has weighed more heavily on results than anticipated, according to Reuters.
Volvo's sales in China plunged 35% in the second quarter, contributing to a decline in its operating margin to 1.1% from 1.6%.
BMW also struggled in the world's largest auto market, with China deliveries falling 30%.
What they’re saying: “Everyone, including us, was thinking (the first quarter) is going to be a bit rocky, but I think in Q2 it has taken the industry by surprise," CFO Fredrik Hansson told Reuters.
Why it matters: Volvo's outlook highlights how quickly geopolitical tensions and regional market weakness can pressure automaker profitability, even as manufacturers work to offset those challenges through new products and cost reductions.
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Between the lines: Volvo warned that rising oil prices and higher costs for key materials such as lithium and aluminum—driven by shipping disruptions in the Strait of Hormuz—could weigh on operations.
Even so, the automaker sees two key factors supporting a second-half recovery.
Volvo expects earnings margins to improve as production of the new EX60 SUV reaches full capacity, with vehicle volume projected to increase 10% from the first half, according to Reuters.
The Swedish automaker, majority-owned by China's Geely Holding, said that much of the indirect savings from its cost-cutting plan were achieved six months ahead of schedule.
Bottom line: The pace of the company's recovery will depend on whether stronger production and new-model momentum can outweigh continued global headwinds.
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