Welcome to Volvo Cars and our pre-close calls for the Q1 of 2026. This is the second call. We hosted one yesterday as well, as I'm sure you know. We will start off as usual with a short presentation from our side and then followed by a Q&A session. There aren't that many in the call today, but if we're adding more people and so on, you can just raise your hand via the Teams tool, and we'll hand over the word to you to ask your questions. Let's get started by looking at the macroeconomic environment. The global macro environment has remained mixed through the Q1 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. 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, underlining continued household caution around affordability and the broader economic outlook. Moving over and looking at China, where 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, though, domestic demand is still not fully robust, and competitive intensity in autos remains high, with Chinese manufacturers continuing to expand internationally and increase pressure in overseas markets, including Europe. When looking at S&P Global and their most recent forecast, which was published 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 U.S. premium segment is expected to contract by 3.0% in 2026, Europe to contract by 0.8%, and China premium market to contract by 2.0%.
Moving over to Volvo Cars and some of the more specific KPIs, for us, starting with our revenues. Reported retail sales for January and February show a - 19% volume decline so far during the Q1 , with January down - 16% and February down - 22%. As a reminder, as we have said in previous pre-close calls as well, wholesales and not retail sales is the best input to use when calculating the volume effect on revenue. As has also been communicated throughout 2025, we aim for a balance between retail deliveries and wholesale volumes. Looking at FX, due to a stronger SEK and a weaker U.S. dollar than one year ago, FX poses a continued headwind. Higher discounts seen in Q4 2025 will flow through into Q1 2026.
Moving over and looking at gross margins. As for revenue, the higher discounts seen in Q4 2025 will have a negative impact on Q1 gross margins. Tariffs that were introduced during 2025 will also impact Q1 2026 negatively. As stated in our annual report, we do hedge raw materials, but we will not comment on the exact levels of those hedges. Moving over to EBIT margin. As seen during 2025, depreciation and amortization in 2025 versus 2024 have increased and will continue to increase as we launch new or updated products. Also, the effect from executed cost and cash program during 2025 will now flow through into Q1 2026. Last but not least, looking at the free cash flow.
As mentioned during the Q4 presentation, Q1 cash flow will be under pressure for a couple of main reasons. Historically, Q1 typically demonstrates seasonally weaker cash flow generation due to inventory buildup. 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 here in Torslanda, Gothenburg. Free cash flow has also been impacted by continued investments in the SPA3 platform, which the EX60, of course, is built on, and also the finalization of the Košice plant, along with some other things. Thanks for listening in, and now we'll move over to the Q&A session. We can start off with handing over the word to George. Please go ahead.
Hi. Good morning, and thanks for taking my question. I had a couple of questions, if that was okay. The first one was just with respect to the ASPs in Q1 relative to Q4. I think, from an FX perspective, it looks fairly flat, at least the spot rate. You know, aware that might not be exactly what you'll be seeing. I think the pricing commentary yesterday was that the pricing sequentially is fairly flat. Should we expect the ASPs to be broadly similar, or is there a mix effect to take into consideration or a hedging effect with respect to the FX? Thank you.
Hello George. No, in terms of the pricing, you're correct. I mean, the last time we met, you were seeing in February and not a lot has happened since then, if you look on a one-to-one basis. In terms of mix, we have to come back with that, usually quite complicated calculations, so I think it would be wrong for us to preclude that calculation as of yet.
Okay. Second question I had was just with respect to the FX at the EBIT level, obviously expecting a negative top-line impact. Are you aware of any kind of movement in the, I guess, in the hedges that would result in it not being in that negative top-line impact not flowing through to a negative at the EBIT level for the Q1 ?
Yeah, I think we need to answer that in two different ways. First, if you look year-over-year, you remember that in Q1 2025, we had quite large negative balance sheet revaluations, which of course helped the year-over-year development. If we look sequentially, as you say, the rates have been, if anything, a little bit maybe in our favor. It's difficult for us to say exactly what will flow through EBIT since we haven't seen the balance sheet revaluation yet. That's done in the last couple of days, actually, in the quarter. That is a little bit difficult to answer at this time.
Just with respect to the emissions credit phasing this year, in H1 last year, they were very much weighted to Q2. Should we expect a similar this year, or would you expect a more kind of evenly distributed phase in?
If we account for CO2 revenue in Q1, I think you could assume that, given the earlier discussions last year, that they will be more evenly spread throughout the quarters this year.
Got it. With respect to used cars, parts and accessories, certainly with respect to the Q1 was a little bit weaker for used cars last year. Is that normal seasonal activity or normally is Q1 not too dissimilar to the remaining nine months?
Usually, we have more used car sales in Q3 and Q4 . In Q1 and Q2, you usually push out, you know, not push out, but you have more of those cars going out to the different channels, and then you get them back during vacation or after vacation, where we sell them in our books.
Thank you. Sorry, just a final one, just for perhaps a clarification. Are you aware of any one-off items that were in Q1 last year that we need to consider from a bridge perspective, and are you aware of any one-off items that we should consider for Q1 2026? Thank you.
There are always effects in every quarter that is not directly related to the sales volume in that quarter, but it's still operational. I think the question should be if we are aware of any, what do we call it? We call it items affecting comparability, right? I don't think we had that in Q1 last year. In terms of Q1 this year, it's we can't really comment on that until we publish the Q1 results.
Okay. Nothing you're aware of in advance for Q1 this year by the sounds of things. Great. Thank you very much.
Thank you. Thank you. Yeah. Matthias.
Hey, team. Thank you very much for taking the time today. I just have one question, clarifying question. I only could listen half to the call yesterday, but I think you've mentioned also there in the first half or the Q1 , there is some buildup of inventories for the XC90 and XC60 in advance of the EX60 launch. Would that also mean that in the Q1 we have probably a bit higher wholesale and probably higher production of these vehicles so that it could actually be a bit better than retail, if that makes sense?
Yeah. I think there was some confusion yesterday. Thank you for bringing that up, Matthias. It was some confusion yesterday, actually. We got a direct question whether or not retail and wholesale will be the same in Q1. Of course, we can't answer that because we haven't published the sales results yet.
Sure.
We haven't seen the Q1 end volumes yet, so we can't really say that. What we've written in the script as clearly as we can is that we aim to have a balance between retail and wholesale, and we have not commented on production other than saying that we are building inventory on XC60 and XC90, and that will affect the free cash flow negatively for Q1 .
I see. Normally, the reasoning would be fair that the production should normally be relatively okay just because you're pre-producing a little bit of those.
No, normally production is higher in Q1 than.
Mm-hmm
than wholesales. Yes. Mm-hmm.
Yeah. Okay. Got it. No, super helpful. Thank you very much.
It will be this year as well, so we can be clear with that.
Yeah. Makes a lot of sense. Great. Thank you so much, guys. Thanks.
Thank you. Anyone else who would like to ask any questions? No. Doesn't seem to be that. In that case, thank you very much for listening in. As always, if you have any questions or thoughts, just reach out to us within the IR team here at Volvo.
Could I just ask maybe one more-
Yeah, of course. Of course.
Sorry. Just on the tariff side, do you think there is any meaningful change at the moment in the last month versus how the run rate has been, I don't know, in the second half of 2025? Because some things have actually changed a little bit. Or would you say it's roughly similar versus what it has been before?
No. I'd say it's fairly similar.
Fairly similar. Okay. Okay. No, that's very clear. Great. Thank you. Thank you so much, for your time again. Appreciate it.
Thank you. Thanks.
Thanks.
Take care all. Have a great day.
Thank you. Bye. Thanks.
Bye. Thank you.