Volvo Cars to Eliminate 2,500 Jobs as China Sales Slump Triggers Quarterly Loss

Volvo Cars announced plans on Friday to cut 2,500 jobs worldwide and slash costs after a steep downturn in China dragged the Swedish automaker into a third-quarter loss. Investors reacted swiftly, sending the company’s stock down 24.2% by the end of Friday’s trading session.

The company, owned by China’s Geely Holding, posted a third-quarter operating loss of 5.6 billion Swedish kronor ($563.7 million). The results mark a sharp reversal from the previous period, when the automaker generated an operating profit of 6.4 billion Swedish kronor. Management cited a deteriorating business environment driven by tougher market conditions in both China and the U.S., which weighed heavily on free cash flow.

Reinventing Strategy for the Chinese Market

The core of the financial strain stems from East Asia, where Volvo Cars seen its China revenues plunge nearly 50% year-on-year. Premium automakers in the region face hypercompetition from fast-growing domestic rivals that have aggressively undercut prices.

Speaking on CNBC’s “Squawk Box Europe” on Friday, Volvo Cars CEO Håkan Samuelsson acknowledged that shift. “It’s really a lot about the Chinese market, of course, where the change has come faster than we thought. And really now we can see that selling global cars developed in Europe and China won’t work, and then this is affecting all the Western players in China,” Samuelsson said.

Samuelsson noted that Chinese drivers are increasingly turning to domestic alternatives that offer stronger competition. To counter the downturn, he called for a restructured regional approach and vehicles built specifically for local buyers. Moving forward, Volvo Cars plans to share vehicle platforms with its parent company, Geely, while developing key infotainment and driver-assistance software directly within China. “If you don’t have that, I think you can’t sell cars in China,” he added.

Global Restructuring and American Headwinds

Challenges extend beyond Asia. In the U.S., profit margins faced added strain from trade tariffs alongside reduced consumer incentives for electric vehicles.

In response to these compounding headwinds, the automaker is launching a savings drive to cut 5 billion Swedish kronor in expenses. The corporate restructuring will eliminate 2,500 positions globally, including 2,000 roles in Sweden, as corporate management seeks a leaner central footprint.

“It’s really a consequence of this development, our long-range strategy,” Samuelsson told CNBC. “We will have more empowered, stronger regions, and then of course you can’t keep the same resources on the corporate central level. So we need a leaner central administration.”