STOCKHOLM: S&P on Friday lowered the outlook for its BB+ credit rating on Volvo Cars to “negative” from “stable”, saying U.S. tariffs and tougher competition in China were hurting the company’s growth prospects.
The Sweden-based automaker, which is majority-owned by China’s Geely, last month withdrew its earnings guidance and announced cost cuts, which will include laying off some 3,000 mostly white-collar workers amid a slowdown in demand.
“The negative outlook on Volvo Cars reflects its large exposure to U.S. import tariffs and the increasing marginalisation in the Chinese market,” S&P said in a statement.
“We expect Volvo Cars’ profitability and cash generation after investments to come under pressure in 2025-2026, partly alleviated by a substantial cost reduction programme.”
The United States represented 16% of Volvo Cars sales in 2024, while China accounted for 20%.
Volvo Cars to cut 3,000 jobs in restructuring
Volvo Cars produces only one of its models in the United States, and relies on imports for the rest, leaving the company more exposed to U.S. tariffs than many of its European peers.
S&P said a proposed 2027 U.S. ban on automakers controlled by a Chinese entity also weighed on the outlook.
In the most recent twist in the trade turmoil sparked by President Donald Trump, a U.S. court on Thursday temporarily reinstated sweeping new tariffs, a day after another U.S. court had ordered an immediate block on them.
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