Volvo Cars Cuts 2,500 Jobs and 5 Billion Kronor in Costs Amid China Sales Slump

Volvo Cars announced Friday that it will cut 2,500 jobs following a steep decline in its Chinese market that weighed on third-quarter earnings.

The Swedish automaker posted an operating loss of 5.6 billion Swedish kronor ($563.7 million) for the third quarter, compared with an operating profit of 6.4 billion Swedish kronor in the prior period.

Majority-owned by China’s Geely Holding, the company pointed to a deteriorating business environment driven by “tougher” conditions in China and the United States, which it said “negatively affected free cash flow.”

Volvo Cars shares fell roughly 27%.

Volvo Cars shares year-to-date performance.

“The shift in the Chinese market has happened faster than we anticipated,” Volvo Cars CEO Håkan Samuelsson told CNBC’s “Squawk Box Europe” on Friday. “Selling globally developed vehicles designed for Europe and China is no longer viable, and this challenge extends to all Western automakers operating in China.”

Chinese buyers are increasingly turning to domestic alternatives that have grown stronger and more competitive, Samuelsson said. “We need a new strategy in China—one built on a more regional structure, a more empowered local organization, and vehicles tailored to regional markets.”

Samuelsson added that Volvo must become more cost-competitive and needs to share platforms with parent company Geely while developing critical software in China, including infotainment and driver-assistance systems. “Without that capability, selling cars in China will be extremely difficult,” he said.

Revenue from Volvo Cars’ China operations dropped nearly 50% year over year as premium brands faced intense “hypercompetition” from emerging Chinese rivals, placing heavy downward pressure on pricing, the company said.

In the United States, tariffs and reduced customer incentives for electric vehicles further compressed profit margins, according to the automaker.

Volvo Cars plans to reduce costs by 5 billion Swedish kronor and eliminate 2,500 positions worldwide, with 2,000 of those roles based in Sweden.

“These changes are a direct result of our long-term strategic direction,” Samuelsson told CNBC. “We are moving toward stronger, more autonomous regional operations, which means we can no longer sustain the same level of central corporate resources. A leaner headquarters is essential.”

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