Cars & EVsbreaking news
Volvo CEO says China sales fell 50% faster than expected, and 2,500 jobs are going
Volvo Cars swung to a 5.6 billion kronor operating loss in the third quarter, and its CEO says Europe-developed models will not work in China.
A halved China business and a quarterly loss
Volvo Cars' revenues in China fell almost 50% year-on-year, and the drop is hitting profitability [1][2]. The automaker said on Friday it plans to cut 2,500 jobs after the decline in its Chinese market weighed on third-quarter earnings [1].
CEO Håkan Samuelsson said the change in the Chinese market has come faster than the company thought [1]. Volvo Cars shares were last down around 27% [1].
The third-quarter numbers
Volvo Cars reported an operating loss of 5.6 billion Swedish kronor ($563.7 million) in the third quarter [1]. That compares with an operating profit of 6.4 billion Swedish kronor in the previous period [1].
The company said a deteriorating environment, led by 'tougher' market conditions in China and the U.S., 'negatively affected free cash flow' [1]. In the U.S., it cited negative effects from tariffs and fewer customer incentives to buy electric cars, which put pressure on profit margins [1].
Why China turned against Western brands
Premium brands in China faced 'hypercompetition' from new Chinese rivals, which also put severe pressure on pricing [1]. Samuelsson said Chinese consumers are now looking for 'domestic alternatives,' which have become stronger and more competitive [1].
He said that selling global cars developed in Europe and China will not work, and that this affects all Western players in China [1]. Volvo Cars is presenting the 'will not work' line for Europe-developed models as a video headline attributed to Squawk Box Europe [1].
The new China plan
Samuelsson said Volvo Cars needs a new strategy in China with a more regional structure, a more empowered region, and regionally adapted cars [1]. He said costs must be competitive [1].
Volvo Cars also needs to share some platforms with its Chinese parent company Geely and develop key software in China, including infotainment and driver-assistance systems [1]. Volvo Cars is owned by China's Geely Holding [1]. Without competitive costs, shared platforms with Geely, and China-developed key software, the CEO said Volvo Cars cannot sell cars in China [1].
The cuts
Volvo Cars is looking to cut 5 billion Swedish kronor in costs [1]. It will eliminate 2,500 jobs globally, with 2,000 of those based in Sweden [1].
Samuelsson said the restructuring is a consequence of the company's long-range strategy, creating more empowered, stronger regions and requiring a leaner central administration [1].
What it means for you
If you work at Volvo Cars in Sweden, 2,000 of the 2,500 job cuts are based there [1]. If you own the shares, they were last down around 27% [1].
If you follow Volvo Cars in China, expect a more regional structure and regionally adapted cars [1]. Shared platforms with Geely and China-developed infotainment and driver-assistance software are part of the plan [1]. In the U.S., watch tariffs and the level of incentives for electric cars, which the company says pressured margins [1].
Sources
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