(Corrects to remove Reuters instrument code for Geely Holding in paragraph 2)

By Marie Mannes

STOCKHOLM, April 29 (Reuters) – Sweden-based Volvo Cars reported on Wednesday a smaller-than-expected fall in quarterly ‌profit as savings cushioned tough market conditions, but said the impact of a pull-back ‌of subsidies and other developments in the United States had been unexpectedly bad.

Shares of the company, which is majority-owned by ​China’s Geely Holding, were up 1% in early trading, taking a year-to-date fall to 25%.

“We are not satisfied with our results … but despite a volume drop coming from external factors we are more or less flat in profitability … which I think is really well done internally with all the factors we can ‌control,” CEO Hakan Samuelsson told Reuters.

Volvo ⁠Cars had warned that profit would be negatively impacted by tariff-related costs, currency effects, tough competition and geopolitical tensions.

It said second-quarter profitability would continue to ⁠face headwinds, compounded by the production ramp-up of its new electric EX60, which started production in its Gothenburg factory last week.

“You can of course wish for a better market from the external world but we will ​now ​just concentrate in the second half of the year ​to come back to growth,” Samuelsson said.

First-quarter ‌operating profit was 1.6 billion crowns ($172 million) against a year-earlier 1.9 billion, on an 11% sales drop, with a gross margin of 18.5%.

Analysts at Handelsbanken, Bernstein and JPM said the profit drop was smaller than expected, citing a consensus of 900 to 950 million crowns.

“What is sticking out that they are having cost savings of about two billion in the quarter, which is counteracting the sales ‌drop and the negative price mix,” Handelsbanken’s Hampus Engellau ​said.

Volvo Cars said its cost cuts under a programme launched ​a year ago, and the fact it ​had kept its market share in the premium segment in Europe, supported profits.

However, ‌Samuelsson said that it had been more ​severely impacted in the ​U.S. than anticipated, as a critical $7,500 tax break for buyers was removed, which also impacted its plug-in model line-up in addition to its EVs.

The group had earlier warned that profit ​would be negatively impacted by tariff-related ‌costs, currency translation effects, tough competition and geopolitical tensions.

Volvo Cars reiterated that it aims ​to increase group sales volumes for the full year.

($1 = 9.2761 Swedish crowns)

(Reporting by Marie ​Mannes, Editing by Anna Ringstrom and Thomas Derpinghaus)