Good morning. We wait another minute or so just to see if more people are joining this call. This is the second call, and we had one yesterday with around 25 participants. Let's stay online for a minute or so before we start. All right, let's kick off. This is the second pre-close call for Volvo Car AB ahead of the third quarter result to be released on October 23. We will do as per usual. The script has been published also on our web page, but we will start with a sort of a macroeconomic context and then dive into the different parts of the P&L and some other comments as well. Let's kick off, and then we'll open up for questions as usual afterwards. If we first look at the macroeconomic environment, it has remained soft with only modest signs of stabilization.
Consumer confidence in Europe continued to soften during the third quarter, while industry indicators of both manufacturing and services remained subdued. In the U.S., consumer sentiment showed no material recovery over the summer months, staying significantly below the 2024 levels and pointing to continued caution among households. Uncertainties around trade policy remain a major headwind. The U.S. has maintained tariff rates at their highest levels in decades, with a 27.5% yield on imported cars in effect. Market concerns are elevated, with the overall economic outlook remaining unpredictable given the risk of further adjustments on the back of volatile macroeconomic data. Volvo Car AB is affected both indirectly and directly. Looking more specifically on the automotive sector, S&P Global has again revised its forecast downwards for the automotive sales volumes. The most recent forecast published in August reflects the full impact of tariffs and weaker demand. The U.S.
premium segment is now expected to decline by 4% in 2025. The China premium market is forecasted to contract by 11% in 2025. Globally, the premium segment is now expected to decrease by 6% in 2025, which should be compared with the 1% decline forecasted in March before the U.S. tariffs were announced. Looking then into Volvo Car AB specifics and our revenues, as was communicated during the first quarter as well as in the second quarter of 2025, the first and second quarter wholesales in 2024 were boosted by the quick ramp-up of EX30, affecting the comparable number in 2025. It was also communicated that this effect was primarily isolated to the H1 2025. Hence, wholesale in the third quarter is expected to be more in line with retail sales, as was also communicated during the second quarter conference call.
We also said that during our fourth quarter last year and first quarter this year conference calls that a significant inventory reduction in Q4 2024 would have the effect that the retailers would have one or two quarters to adjust their inventory levels in 2025. That adjustment has been done, as we have said also previously, so it's been more balanced also from a retailer perspective. This means that the underlying factors driving the first and second quarter imbalance between wholesale and retail deliveries no longer remain. As a reminder, wholesale and not retail sales is the best input to use when calculating the volume effect on sales. Reported sales for July and August, retail sales that is, show a -12% volume decline so far during the third quarter.
Revenues from contract manufacturing were SEK 2 billion in the first quarter of 2025 and SEK 3 billion in the second quarter of 2025. For the third quarter, we have no information available to share at this stage. Looking at the gross margins, besides the effect from weaker volume development, there will be effects from the U.S. tariffs introduced during the second quarter. As previously communicated, we have taken pricing actions to mitigate the impact. As of November 2024, the EX30 is subject to higher tariffs as it is imported from China. Since production has started in Ghent in Europe, the effects will start to subside from the third quarter when production is ramped up. We expect to reach full production pace during the fourth quarter. As previously mentioned, the retail sales have quarter-to-date dropped by 12%, which will have a negative impact on the gross margin in the quarter.
Due to continued stronger Swedish krona, currency effects also pose a continued headwind. Looking at EBIT margin, excluding JVs, as we said in the first and second quarter, we're also expecting to increase the depreciation and amortization in 2025 versus 2024 following the ramp-up of production of vehicles such as the EX90 and the ES90. We also said during the second quarter that the revenue from the sale of CO2 credits is expected to also be affected in the third quarter, but that the revenues reported in the second quarter were related to the full first half of 2025. EBIT margin then including JVs. Just as a reminder, we stopped including Lynk & Co earnings into our accounts following the sale of Volvo Car AB's ownership in Lynk & Co in February 2025.
Turning to cash flow, historically, the third quarter typically demonstrates a seasonally weak free cash flow generation as there are planned shutdowns during the normal vacation period. Looking then on other comments, if you can still hear me, we had some hiccup here in the room. Other comments relating here to the tariffs, as an EU and U.S. joint statement on August 21, 2025, on the trade deal agreed by both sides confirmed that there would be a U.S. tariff reduction to 15% on EU cars and car parts, while the EU will bring down its own tariffs on U.S. autos and parts to 0%. The U.S. tariff reduction would take effect from the first day of the month in which the EU submits the necessary legislation to lower its own tariffs. The EU has since submitted the necessary legislation, but the U.S.
still has to publish an executive order to lower the tariffs to 15%. The effect should be retroactively as of August 1. The EU legislative process to implement the zero tariff regime on U.S. cars and car parts now rests with the EU member states and the European Parliament for approval. That concludes the opening remarks from our end. We'll be happy now to take any questions that you might have. Just raise your hand and we'll take it in order. If there are no questions, you can find the script on the web page. As always, you can reach out to the IR team. We'll soon enter the silent period, though. Otherwise, they look forward to meeting you then during the third quarter result. For my part, this is my last pre-close call with Volvo Car AB.
I will now go back to the investor side, joining AMF as of September 29. I look forward to seeing you in my new role then. Thanks a lot for the interest over the past few years and all the questions and challenges you've put to us. I really appreciate that. If there are no more questions, I think we then conclude the call. Thank you very much.