Volvo Cars plans to eliminate around 2,500 jobs worldwide as the Swedish automaker steps up its cost-cutting efforts following a sharp deterioration in its third-quarter financial performance.
According to Reuters, the latest workforce reductions come as the company faces weakening electric vehicle demand, rising US tariffs and intensifying competition from Chinese automakers.
The company, majority-owned by China's Geely Holding, reported an operating loss of 3.7 billion Swedish crowns ($373 million) for the third quarter of 2026, compared with a profit of 5.8 billion crowns in the same period last year.
The loss was significantly higher than analysts' expectations, while Volvo Cars' shares plunged 24% on Friday to another record low.
The automaker is also targeting an additional 5 billion crowns in cost savings as it seeks to improve cash flow, lower its break-even point and strengthen its financial position.
Job cuts to affect Sweden and international workforce
The latest workforce reduction will affect approximately 2,000 positions in Sweden and 500 elsewhere.
The company will implement the cuts through the termination of consultant contracts, natural attrition and targeted exit packages for employees.
The measures are expected to affect around 6% of Volvo Cars' workforce and come on top of approximately 3,000 job cuts announced under an earlier restructuring programme.
Hakan Samuelsson, Chief executive, Volvo said, "The third quarter of 2026 was very disappointing and reflects a year that has become far more challenging than originally anticipated. Our ongoing turnaround plan therefore needs a decisive reinforcement.”
Samuelsson told Reuters that the latest job cuts should be completed by mid-2027, although he did not rule out further measures.
Volvo Cars expects the full financial impact of the new savings programme to be realised by the end of 2027.
Cash burn doubles as profitability weakens
Volvo Cars burned through approximately 8.9 billion Swedish crowns in cash during the third quarter, double the amount recorded in the same period in 2025.
Revenue declined nearly 23% year on year to 66.9 billion crowns, while the company reported a net loss of 5.7 billion crowns, compared with a net profit of 4.5 billion crowns a year earlier.
Its gross margin also fell to 14.7% from 20.4% in the year-ago quarter, reflecting pressure on profitability amid weaker sales volumes and a challenging global automotive market.
Handelsbanken analyst Hampus Engellau warned that continued cash outflows could create additional funding pressure.
"If that continues for another two quarters, they might need more capital," he said, while noting that the expected ramp-up of Volvo's EX60 electric SUV could help improve the company's position. Volvo Cars still had more than 30 billion crowns in cash.
The latest savings programme builds on an 18-billion-crown cost-cutting plan announced last year, which included around 3,000 job reductions worldwide.
EV competition and tariffs add to business pressures
Volvo Cars is facing mounting challenges across key markets, including intense competition from Chinese manufacturers, excess production capacity and weaker demand for electric vehicles.
US tariffs and the removal of consumer incentives for fully electric cars and plug-in hybrids in the United States have added to the pressure on margins. In China, the automaker is prioritising profitability over market share rather than entering an intensifying price war with domestic rivals.
"We continue to operate in a very tough environment with strong external challenges: de-globalisation, hypercompetition and climate change," Samuelsson said in a statement.
The company has also withdrawn its full-year guidance for sales volumes and cash flow, citing uncertainty in the operating environment.
Its electric vehicle strategy has faced further setbacks, with delays affecting production of the EX60 electric SUV, a key model in its turnaround plans.
Battery assembly issues have slowed manufacturing, with around 5,000 units of the 40,000 planned for this year built so far, according to the company.
Samuelsson acknowledged that Volvo Cars needed to adapt its regional strategy to changing market conditions in China and the United States.
"We should have maybe realised earlier that we need to be more regional in China. Maybe we should have also realised earlier that tariffs would come, so we need to localise more in the US," Samuelsson said.
"So that's a weakness right now which we are addressing."
Incoming CEO faces a tougher turnaround
The latest results add to the challenges facing Klaus Zellmer, the former Skoda Auto chief executive who is set to succeed Samuelsson no later than October 1, 2027.
Samuelsson returned from retirement in 2025 on a two-year contract to lead Volvo Cars' turnaround. However, despite earlier cost reductions, a regionalisation strategy and closer ties with Geely, the company's outlook has weakened further.
Bernstein analysts said Zellmer would inherit a more difficult situation than initially anticipated, with near-term prospects for improvement remaining limited.
Volvo Cars plans to launch 13 new models by the end of the decade, six of which will be designed for the Chinese market. Samuelsson has said he does not expect a significant improvement in the group's performance in China until these models begin arriving.
The latest restructuring highlights the pressure on automakers to balance electrification investments, regional market challenges and cost discipline while maintaining competitiveness in an increasingly challenging global automotive industry.