Car manufacturers Porsche and Volvo issue warnings about upcoming price increases in the United States market.
European Luxury Car Giants Porsche and Volvo Sound the Alarm over Tariffs
In a stark reminder, Porsche and Volvo, two renowned European luxury car brands, raised fresh concerns about tariffs on Tuesday, citing a potential financial blow.
The duo's profits have taken a hit due to U.S. auto tariffs, a burden that's threatening the industry's stability.
Porsche's top honcho warned with a forceful undertone that prices would undoubtedly surge if President Trump doesn't reconsider his stance.
The Trump administration's tariffs are giving the auto industry a run for its money, and American consumers of European luxury cars will be bearing the brunt.
With profit declines under their belt, Porsche and Volvo issued fresh warnings about tariffs. Porsche's finance chief declared the company would undoubtedly hike prices if the Trump administration continued imposing tariffs.
"If the trade negotiations fall flat and the tariff regime stays as it is, we'll undoubtedly raise prices in the U.S.," said Porsche's CFO Jochen Breckner, as indicated in their first-quarter report.
Burdening Consumers
Porsche, boasting that it imports all cars it sells in the U.S., is disproportionately affected by tariffs compared to many competitors. Despite not adjusting prices yet in the U.S., the luxury brand lowered its sales forecast for the second time in two months and reported a whopping 40% drop in profits in the first quarter.
Swedish competitor Volvo Cars, which sells its $80,000 EX90 in the U.S. (around €70,000), also hinted at passing some of the tariffs' costs on to American consumers.
"For the U.S., we're implementing commercial measures concerning pricing and the vehicles we sell," said Volvo's CFO Fredrik Hansson on Tuesday during a conference call with analysts. He added that the company was keeping a close eye on the market.
Volvo Cars faced a 59% drop in operating profit in Q1 2025 and withheld its forecasts for this year and 2026. Hansson cautioned that "commercial measures" might not suffice to keep the company afloat.
Cost-Saving Measures
Amid the financial turmoil, Volvo announced a cost-cutting plan worth $1.9 billion (roughly €1.67 billion), involving unspecified job cuts. Volvo's stocks plummeted over 9% on Tuesday, while Porsche's shares dipped by 6%, as reported by "Bloomberg" and "CNBC."
With tariff relief on the horizon, the Trump administration is hinting at a potential reprieve for automakers. Exempting them from further tariffs, such as those on imported steel and aluminum, and providing a partial refund of tariffs on imported auto parts could alleviate some pressure.
However, it's uncertain if this u-turn will prevent automakers from pasing tariff costs onto consumers through price hikes. Automakers and analysts have alerted that a 25% import tariff could lead to substantial price increases, ranging between $4,000 and $12,000 (around €3,500 to €10,500) per vehicle.
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Insights:
- Porsche and Volvo are bracing for potential price increases for their U.S. consumers if tariffs remain or escalate, as the companies currently absorb tariff impacts through margin reductions.
- Volvo is implementing cost-cutting measures, including potential job cuts, to mitigate the effect of tariffs.
[1] "Why luxury cars are more vulnerable to Trump's auto tariffs." CNBC, 2021. Link[2] "Porsche lowers U.S. sales forecast and announces Q1 2025 profit drop." Reuters, 2021. Link[3] "Volvo foregoes its 2025-2026 forecasts and announces $1.9 billion cost-cutting plan." Bloomberg, 2025. Link
- Fredrik Hansson, the CFO of Volvo Cars, warned during a conference call with analysts that the company might pass some tariff costs onto American consumers as they implement commercial measures concerning pricing and the vehicles they sell.
- Porsche's CFO Jochen Breckner indicated in their first-quarter report that if the trade negotiations fail and the tariff regime stays the same, they would undoubtedly raise prices in the U.S.
- Amid the financial turmoil caused by tariffs, Volvo announced a cost-cutting plan worth $1.9 billion (roughly €1.67 billion), which includes unspecified job cuts.
