Volvo Cars is facing its most severe operational crisis since going public. Dragged down by collapsing sales in the Chinese market, the Swedish automaker recorded a massive loss in the third quarter, with its shares plunging more than 30% in a single day to a historic low, and announced a new round of large-scale layoffs and cost reduction plans.
Volvo Cars reported on Friday a net loss of SEK 5.7 billion (approximately USD 575 million) for the third quarter, compared with a net profit of SEK 4.5 billion in the same period last year, swinging from profit to loss year-on-year. Quarterly revenue fell 23% year-on-year to SEK 66.9 billion, with net cash outflow of nearly SEK 9 billion. Following the announcement, the company's shares fell more than 30% during intraday trading, hitting a historic low.
Under the weight of these results, Volvo Cars announced it needs to cut an additional SEK 5 billion in costs, including reducing approximately 6% of its workforce, on top of the roughly 3,000 layoffs already announced. CEO Hakan Samuelsson warned that "additional measures" to further compress costs cannot be ruled out in the future, and acknowledged that meaningful improvement in performance is difficult to expect in the short term.
China Sales Nearly Halved, Becoming the Core Drag
Volvo Cars' revenue in the Chinese market fell nearly 50% year-on-year, which is the core reason for this quarter's collapse in performance. Samuelsson stated that the market model of relying on imported global models and only completing assembly locally has come to an end.
Beyond the Chinese market, the company also reassessed revenue it had originally expected from selling regulatory credits to competitors. After the Trump administration relaxed automobile emission reduction regulations, this revenue expectation shrank significantly, further eroding quarterly performance.
New Models and Geely Platform May Become Transformation Pivot
Facing the predicament, Samuelsson said the company is advancing localized models equipped with Chinese domestic software and developed on Geely Auto (SEHK: 00175) low-cost platforms, aiming to enhance competitiveness in the coming years. Volvo Cars is controlled by Geely Auto (SEHK: 00175), and the two parties have already deepened collaboration in areas such as component sharing.
However, Samuelsson also admitted, "This is a very deep decline. I hope to see some degree of stabilization, but I think real improvement should not be expected in the near term." This statement means that even with a clear localization strategy direction, reversing the downturn in the short term remains extremely difficult.
New CEO Takes Over, Analysts Pessimistic
At the management level, former Skoda chief Klaus Zellmer will take over as CEO around October next year, succeeding Samuelsson, who returned in 2025. During Zellmer's tenure at Skoda, he built the brand into the most profitable subsidiary under the Volkswagen Group, surpassing Porsche.
But the current situation makes the market less than optimistic about his prospects. Bernstein analyst Harry Martin wrote in a research note: "It is hard for us to see any signs of improvement in the near term. The new CEO Klaus Zellmer... now faces challenges far more daunting than when his appointment was announced just a month ago."
Industry Headwinds Sweep Across Western Automakers
Volvo Cars' difficulties are not an isolated case. Major Western automakers including Volkswagen, Porsche, BMW, and Jaguar Land Rover are all cutting staff, collectively responding to the impact from Chinese competitors, US tariff pressures, and rising raw material costs driven by Middle East conflicts.
However, Volvo Cars has been hit particularly hard — its electric vehicle and plug-in hybrid model sales have declined in both the Chinese and US markets, and combined with previously implemented large-scale cost reductions, the company's financial buffer has been significantly narrowed. The cash outflow of nearly SEK 9 billion this quarter has further intensified market concerns about its liquidity position.
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