The company, which is owned by Chinese auto giant Geely, said its after-tax profit fell 10% to 3.6 billion kronor (USD 333 million).
Its revenue fell two% to 93.9 billion kronor due to lower sales from contract manufacturing -- production that is outsourced -- and unfavourable currency exchanges.
But the group said its retail sales rose by 12%, reaching 182,700 cars, with a record for a single month in March.
Electric vehicles accounted for 21% of total sales in the quarter, compared to 18% a year earlier.
"We expect demand for our cars to remain robust in coming quarters in line with our guidance of full-year sales volumes growth of at least 15%," Volvo Cars chief executive Jim Rowan said in a statement.
Volvo Cars is reducing its stake in Polestar, its high-end electric vehicle unit, to 18% from 48%.
Geely is due to take a major stake in Polestar, allowing Volvo Cars to focus on its other operations.
"This is a good and natural moment for a transition of our relationship with Polestar," Rowan said Wednesday.
"It allows us to fully focus on our own investment plans, while Geely has expressed they will take full responsibility for continued operational funding for Polestar going forward," he said.
"However, the close collaboration between Polestar and Volvo Cars in various areas will continue to the benefit of both companies."
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