Shares of Volvo Cars tumbled sharply on Friday following the company’s announcement of a steep decline in sales, plans to cut 2,500 jobs, and warnings of intensified competition in China that will necessitate significant changes for European automakers.
Volvo’s shares lost more than 25 percent of their value on the Stockholm exchange, reflecting investor concerns over the company’s rapidly deteriorating prospects in the world’s largest automotive market. The planned job reductions represent around 6 percent of Volvo’s global workforce and primarily affect employees in Sweden. These layoffs follow approximately 3,000 job cuts implemented last year.
The Swedish automaker, majority-owned by China’s Geely but headquartered in Sweden, said that sales in China dropped by nearly 50 percent in the last quarter, with market conditions worsening more quickly than expected. Volvo’s chief executive, Hakan Samuelsson, told analysts the company no longer expects to succeed using the traditional strategy of selling premium vehicles developed in Europe to Chinese consumers. "Those times are gone," he said.
In addition to the Chinese market headwinds, Volvo highlighted challenges in the United States, where tariffs and the removal of electric vehicle incentives have also put pressure on the company’s business. Samuelsson did signal that the European electric vehicle market remains a source of relative stability, noting that Volvo leads the premium segment in electrification efforts.
To address the challenges, Volvo is implementing deeper cost-cutting measures, including reductions in research and development spending. Samuelsson, who plans to hand over leadership to Klaus Zellmer by October next year, indicated that the downturn will require ongoing adjustments.
Market analysts expressed concern about the outlook under Zellmer, with a Bernstein research note describing the incoming CEO’s position as "even harder" than previously anticipated and expressing skepticism about near-term improvement.
Volvo plans to intensify collaboration with its Chinese parent company, Geely, by launching the first two of six new models designed specifically for the Chinese market by mid-2024. The company also intends to consolidate its Shanghai offices, reduce its global production sites from seven to five, and consider joint assembly operations with Geely in Chengdu, China, and Ghent, Belgium.
Volvo’s shares have declined by over 80 percent in the past five years amid growing competition and challenging market conditions. Samuelsson emphasized the need to accelerate restructuring efforts, aiming to lower Volvo’s break-even point and improve cash flow to enhance the company’s resilience in a difficult environment.
The news follows similar moves by other European automakers such as Volkswagen and BMW, which have scaled back their ambitions in China amid competitive pressures and rising operational costs. Volkswagen, for instance, announced plans in September for its largest restructuring in nearly nine decades, including an additional reduction of approximately 50,000 jobs globally.