Volvo Cars announced Friday that it will eliminate 2,500 positions worldwide after worsening conditions in China contributed to a steep deterioration in its third-quarter results.
The Swedish carmaker posted an operating loss of 5.6 billion Swedish kronor ($563.7 million) for the quarter, compared with an operating profit of 6.4 billion kronor in the previous period.
Volvo Cars, which is controlled by China’s Geely Holding, blamed the results on a challenging business climate in both China and the United States. The company said tougher conditions in those markets also hurt its free cash flow.
The automaker’s shares plunged 24.2% by the close of trading.
“It’s really a lot about the Chinese market, of course, where the change has come faster than we thought,” Volvo Cars CEO Håkan Samuelsson told CNBC’s “Squawk Box Europe” on Friday. He said the industry had discovered that selling globally developed vehicles designed in Europe and China was no longer a viable approach, a shift affecting Western automakers across China.
Chinese buyers are increasingly choosing “domestic alternatives,” Samuelsson said, adding that local brands have grown more capable and competitive. Volvo now needs a revised China strategy built around stronger regional decision-making and vehicles tailored to local consumers, he said.
The CEO said Volvo must also bring its costs in line with competitors, share certain vehicle platforms with Geely and develop important software in China, including infotainment and driver-assistance technology. “If you don’t have that, I think you cannot sell cars in China,” he said.
Revenue from China dropped by nearly 50% from a year earlier as premium automakers confronted “hypercompetition” from emerging Chinese brands. Volvo said the influx of rivals has placed intense pressure on vehicle prices.
In the United States, tariffs and a reduction in incentives for electric-vehicle buyers further weighed on Volvo Cars, squeezing profit margins in the market.
The company is targeting 5 billion Swedish kronor in cost savings and plans to cut 2,500 jobs globally. About 2,000 of the positions will be located in Sweden.
Samuelsson described the layoffs as a consequence of Volvo’s long-term restructuring plan. With more authority shifting to regional operations, he said, the company can no longer maintain the same level of staffing at its corporate center and must create a leaner central administration.
