Volvo cars announced plans to cut 2,500 jobs on Friday after a sharp decline in the Chinese market weighed on third-quarter results.
The Swedish automaker reported an operating loss of 5.6 billion Swedish crowns ($563.7 million) in the third quarter, down from an operating profit of 6.4 billion Swedish crowns in the previous period.
The company, which is owned by China’s Geely Holding, cited a deteriorating environment caused by “more challenging” market conditions in China and the United States, which “negatively affected free cash flow.”
Shares of Volvo Cars were last down nearly 26%.
“It’s of course a lot about the Chinese market, where change has happened faster than we thought, and now we can see that selling global cars developed in Europe and China won’t work, and that affects all Western players in China,” Volvo Cars CEO Håkan Samuelsson told CNBC on “Squawk Box Europe” on Friday.
Chinese consumers are now looking for “domestic alternatives,” which have become stronger and more competitive, the CEO said. “We need a new strategy in China… it needs to be a more regional structure, a more autonomous region, and we need cars tailored to the region.”
He added that costs must be competitive and that Volvo Cars must share some platforms with its Chinese parent Geely and develop key software in China including infotainment and driver assistance systems. “If you don’t have that, I think you can’t sell cars in China.”
Volvo Cars’ revenue in China fell almost 50% year-on-year as premium brands faced “hypercompetition” from new Chinese rivals, which also put significant pressure on prices, the group said.
Meanwhile, in the United States, the automaker cited the negative effects of tariffs and reduced customer incentives to buy electric cars, which put pressure on profit margins.
Volvo Cars said it plans to cut costs by 5 billion Swedish crowns and cut 2,500 jobs worldwide, including 2,000 in Sweden.
“It’s really a consequence of this evolution, of our long-term strategy,” Samuelsson told CNBC. “We will have more autonomous and stronger regions, and of course you cannot keep the same resources at the central corporate level. So we need a leaner central administration.”
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