Good afternoon, everybody, and welcome to Volvo Cars and our pre-close calls for Q1 2026. It's 3:00 P.M., but people are still joining, so let's give them some 30 seconds or so until we start off. Now it's actually 3:01 P.M., so let's get started. Once again, warm welcome to Volvo Cars. We're in Gothenburg, for today sunny and feeling like spring is approaching. With me, I'm Erik Lundkvist, Head of Investor Relations, and with me I have the rest of the IR team here at Volvo Cars. We will start off with our statement, and then a Q&A session will follow.
As per usual, we would very much appreciate if you raise your hand via Teams if you would like to ask a question, and then we will hand over the word to each and one of you when we come to that. Let's start with the macroeconomic environment and what we have seen so far in 2026. The global macro environment has remained mixed through the first quarter of 2026, with only gradual signs of improvement and still limited visibility across our key regions. In the Euro area, consumer confidence has stabilized but remains subdued. The European Commission's February flash estimate showed Euro area consumer confidence at 12.2, which is still below its long-term average, while the broader economic sentiment indicator also remains slightly below normal levels.
In the U.S., consumer sentiment has improved modestly from late 2025 lows but remains soft in historical terms. The University of Michigan's Consumer Sentiment Index rose to 56.6% in February 2026, from 56.4 in January, but was still well below the 64.7 level recorded a year earlier, which underlines continued household caution around affordability and the broader economic outlook. In China, macro conditions have shown some stabilization, but the recovery remains uneven. Retail sales in the first two months of 2026 increased by 2.8% year-on-year, while exports rose 19.2%, suggesting that external demand remain an important support for growth.
At the same time, domestic demand is still not fully robust and competitive intensity in order to remain high, with Chinese manufacturers continuing to expand internationally and increase pressure in overseas markets, including Europe. S&P Global and their most recent forecast, published now in February, the global premium segment is now expected to contract by 0.9% in 2026, compared with a 0.5% decrease forecasted in October. The premium segment is expected to contract by 3.0% in 2026 and Europe to contract by 0.8% and China premium market to contract by 2.0%. Moving over to Volvo Cars, starting off with revenues.
Reported retail sales for January and February show a -19% volume decline so far during the first quarter, with January down -16% and February down -22%. Again, as we said in our last pre-close call, and as a reminder to all of you, wholesales and not retail sales is the best input to use when calculating the volume effect on revenues. That has been communicated throughout 2025, we aim for a balance between retail deliveries and wholesales volumes. Last but not least, when it comes to revenues due to a stronger SEK and a weaker US dollar than one year ago, FX poses a continued headwind. Higher discounts seen in Q4 2025 will flow through into Q1 2026.
When looking at Gross Margins consolidated, as for revenue, the higher discount seen in Q4 2025 will have a negative impact on Q1 Gross Margins. Tariffs introduced during 2025 will also impact Q1 2026 negatively. As stated in our annual report, we do hedge raw materials, but we do not comment on the exact levels on those hedges. Moving on to the EBIT margin, as seen during 2025, Depreciation and Amortization in 2025 versus 2024 have increased, and they will continue to increase as we launch new or updated products. The effects from the executed cost and cash program during 2025 will now flow through into Q1 2026.
Last but not least, on Free Cash Flow, also as mentioned during the Q4 presentation, Q1 cash flow would be under pressure for the below reasons. Historically, Q1 typically demonstrates seasonal weaker cash flow generation due to inventory build-up. As we said when we published our report for Q4, this effect is even stronger in H1 since we are building inventory of the XC60 and the XC90 to secure supply in preparation to produce the EX60 in Torslanda. Free Cash Flow has also been impacted by continued investments in the SPA3 platform, the finalization of the Košice plant, and other things. That was all for me for now. If you have any questions, again, please raise your hand in Teams, and we will hand over the word to you. Thanks. First off is Nikita from Deutsche Bank. Please go ahead.
Yeah, hi. Hope you can hear me well. Thanks for hosting the call. I would have two questions. The first one, could you give us any comments on the current situation in the Middle East, if this has any impacts on your supply chain or whatever you are seeing in price increases or the supply chain of the chips? The second question is, on the situation in the U.S., after the end of the EV incentives and also with the tariffs now ongoing, are you seeing first price increases in the market as you commented in the full-year conference call? Thank you.
Thanks, Nikita. If we start off with the current situation in the Middle East, we are of course following it extremely carefully to see the development and what's going on. I mean, that said, direct impact for us as a company is limited, if any. I mean, that said, we are of course impacted and are following closely what's going on in terms of prices on raw materials and other things. In regards to the U.S., it's I mean, as you all know, the $4,500 incentive was removed in, was it in September, I think.
In Q3, in September. Which, as we had communicated before, has had an impact on sales in the U.S. Typically, I mean, not saying that this will be the exact case in the U.S. going forward, but what we have seen in the past in terms of governments removing subsidies is that it will take a few quarters for the market to sort of return to normal levels, so to say. Yeah. Anything you would like to add to that, Emil?
No. I mean, I think you said something about price increases, but we increased prices in Q3, I think it was.
I mean, we can't really comment on exactly how that have impacted Q1, I think. I mean, most manufacturers have the same story, that the volume is not going maybe according to what we thought last year, and the prices haven't really stabilized either, so.
Yeah.
Thank you.
Thanks. I think Harry Martin was next in line.
Yeah. Hi. Thanks. The first question I had, just to confirm the comments about wholesale and retail, you are saying that in Q1, the retail and the wholesale volumes should look quite similar?
We said that we are aiming to have retails and wholesale on a similar level over the full year. We didn't say particularly in Q1, but over the full year. Of course, we aim that in every quarter, but we didn't specifically talk about Q1.
Okay. There's no steer that you'll be able to give us for Q1?
No, not beyond what we already said.
Okay. Can you touch on the other sales bucket? Have you seen any reduction in CO2 credit sales, as some of the regulatory changes come through? Yeah, if you can just touch on some of the other sales lines for the revenue bridge, if there's anything we should be aware of.
We can't comment on the CO2 credits specifically. I know that there have been some statements done by other manufacturers, but we would love to talk about that in when we release the Q1 report, but not yet. In terms of other revenue items in the other bucket, nothing beyond the ordinary, I would say.
Okay, great. Then just on the Polestar funding round that happened, I think towards the end of February, I assume that Volvo Cars didn't take part in that, but would you be able to confirm what the ownership stake you now have in Polestar is?
No, we don't have any additional comments to that for now.
Okay. Thank you very much.
Thanks. I think Stuart Pearson was next in line.
Afternoon. Thank you. Just a couple quick ones. First, I know it's early days, but are you seeing any impact, I guess, mainly probably on residual values rather than new car pricing for now on EVs and plug-in hybrids in particular? Either in the U.S. or Europe, given pump prices going up, I just wonder how that affects your business, both in the industrial side, I guess, the financial services side as well. Just wonder if you see any impact there, and just generally what you've been seeing residuals for electrified vehicles in Europe, obviously been under pressure for a while, but any signs of them finding a floor. Then just more broadly on pricing, apologies as a couple of minutes late, so maybe I missed your comments on pricing at the start.
I'm not sure what you're seeing in the European market overall, and again, with EVs, I guess BMW listing their prices on the iX3, but obviously a tough new product competitor there. Just wondering what you're seeing generally on residuals and pricing. Thank you.
Yeah, I mean, there haven't been any major changes versus what happened in Q4 in terms of discounts or pricing on a per unit basis. It's difficult to comment exactly before we have presented the Q1. I think one shouldn't expect that anything drastic happens from one quarter to the next one. Yeah. Should we move on with Mattias ?
Thank you. I'm curious about the retail sales development so far this year and how we should look at that in relation to the guidance for the full year, where I think you've said that you are targeting growth, given that it's a pretty steep negative number so far. If it's basically a two-part question, is this sort of in line with what you had in mind when setting that full year target? Or has the start of the year sort of been weaker than expected? In that case, what do you need in order to get on track for full year growth? Is it sort of dependent on the success of the EX60, which I understand to some extent is capped by your production capacity?
What are the moving parts that sort of could still make the full year growth ambition operative?
I think what we said was that the growth vehicles for 2026 is EC40, EX60, to some extent EX30, and then also EC40 and also actually the EX90. Our EV vehicles, basically, our new vehicles. I mean, several of those vehicles are still in a ramp-up, and the EX60 is not launched yet. Your conclusion is correct that growth has already always been anticipated to coming to H2, and we have ramped up the cars, and we have also placed the EX60 in production. I don't think we should comment on whether or not the January and February sales numbers were according to plan or not because we don't talk about that. We have indicated that the growth would come later in the year.
That's helpful. Another question from me is that I think that you said in Q4 on the cash generation that firstly, there would be some inventory build ahead of the EX60 production start, where you would build some extra XC60s and XC90s in Gothenburg. Firstly, will or should we expect this impact of inventory build to be visible to a large extent in Q1 already, or is that more of a Q2 topic? Then also you commented in Q4 on some final CapEx outflow for the final part of the factory investment in Eastern Europe. Do you have any granularity on what magnitude we're talking about?
Yeah
For those?
Absolutely. I think the way to look on Q1 free cash flow is to recognize that last year, I think we had negative SEK 6 billion or something like that, and that was including a payment from Lynk & Co. I think that the kind of underlying free cash flow in Q1 last year was negative SEK 10 billion. Then this year, we have said that we are, as you alluded to, building up inventory on the XC60 and XC90 in Q1 on top of those, and then also finalizing some of the investments in Košice, for instance. I think that's the way I would phrase Q1.
Do you have any indication of sort of what the magnitude of that CapEx investment is? Or if you can't give a number, is it sort of larger than what it was in Q4 just to help us with the direction?
I think it's on the same magnitude, I would say.
Thank you very much.
Yeah.
Great. Thank you, Mattias. Christian.
Yeah, hello. Thanks for taking my question. Just similar to Stuart's question, but maybe more on a global basis. I think he was asking on a European basis. How did pricing develop sequentially versus Q4? Given the discounting and also the cash and the cost programs, did Q4 see the full benefit, and will Q1 see similar benefits or greater benefits, maybe? Can you comment? Thanks.
I think what we said when it comes to the indirect cost savings plan is that you will see the full effect in Q1 since people still left the company during quarter four, and the full financial effect on the cost side wasn't really flowing through to bottom line yet. Then I kind of missed it. Did you get the question?
Yeah, pricing development versus Q4 globally.
Yeah. I wouldn't assume a very big difference versus Q4.
No.
No.
Thank you.
Agnieszka, Nordea
Yes, thank you. A few questions from me. Starting with the retail sales development so far this year, quite weak, -19% year-over-year. Could you give us any color on how March is developing so far? Do you see any moderation in the decline rates?
No, sorry. I mean, we don't comment on specific months beforehand. I mean, that said, we will release a sales release including March in the beginning of April.
Yeah, yeah. Fair. Thank you. On the EX60 demand, you said that it is kind of exceeding your expectations. Can you also comment on how is your kind of ramp-up planning progressing, and will you have the capacity already in 2026 to accommodate for the demand?
Yeah. I mean, when looking back at what we said in the Q4 call, I think Håkan said that we were aiming to produce some 40,000 cars. Now, I mean, assuming that you've all seen the press release sent out a couple of weeks ago, we are looking into expanding from those 40,000 a bit more, trying to do what we can, which of course is a result of the demand that we see for the car. We haven't said exactly or commented on exactly how many more it will be. Yeah, a few more at least.
Yeah. My last question is on the recalls of EX30. Do you expect any financial costs to be associated with these recalls?
I think we commented that, on that in the annual report, right? Basically saying that the financial impact for us should be, if not none, so very limited.
Thank you.
Any further questions from anyone? Doesn't seem to be any more questions. In that case, thank you very much. If you would find or think of anything else, we host an additional pre-close call tomorrow, as well, if you would like to join that as well. Thank you all. Bye.