Volvo Cars posts Q3 loss and cuts 2500 jobs

Volvo Cars swung to a third quarter operating loss of 3.7 billion Swedish crowns, about 373 million dollars, after earning 5.8 billion crowns in the same quarter a year earlier. The Volvo Cars loss was far larger than analysts had expected, according to Reuters, which cited Citi for an average forecast of a loss of 724 million crowns. Volvo Cars shares closed 24.2 percent lower in Stockholm on Friday, after falling almost 30 percent during the session, and the stock touched 9.60 crowns during trading, its lowest level since the company listed in Stockholm in October 2021. The closing price of 10.70 crowns was also a record closing low. The company said it would cut about 2,500 more jobs, mostly in Sweden, on top of 3,000 job reductions announced earlier. Volvo Cars is majority owned by China's Geely Holding, and the company has faced uneven demand for electric vehicles, tariff pressure, and weaker market conditions in China.

The Volvo Cars loss came with lower revenue. Revenue fell to 66.9 billion crowns in the third quarter from 86.4 billion crowns a year earlier, according to figures reported with the results. Revenue in China fell to 7.5 billion crowns from 14.1 billion crowns. Retail sales fell to 141,300 cars from 158,500 cars. Reported operating income was a loss of 5.6 billion crowns, compared with a profit of 6.4 billion crowns a year earlier, while the adjusted operating loss of 3.7 billion crowns excludes one off items and the company's share of results from joint ventures and associates. Free cash flow was negative 8.9 billion crowns, compared with negative 4.3 billion crowns a year earlier. Gross margin fell to 14.7 percent from 20.4 percent a year earlier. Those figures together describe a quarter in which sales, revenue, and profit all moved in the same direction, and in which China was the weakest part of the story.

Volvo Cars loss and the China market

China has become the central problem for Volvo Cars in this quarter. Revenue from China fell by almost half, and the company said it would put margins ahead of market share in China rather than engage in aggressive price competition with domestic rivals. That choice means Volvo Cars will accept lower sales in China if holding prices protects profit per car, instead of cutting prices to match local rivals and selling more cars at a loss. The company said it plans a similar approach in the United States. Chief executive Hakan Samuelsson said the third quarter was very disappointing and reflected a year that had become far more challenging than originally anticipated. He said the ongoing turnaround plan needs a decisive reinforcement, a statement that points to deeper cost action rather than a wait for demand to recover on its own.

Volvo Cars loss drives new savings plan

In addition to 23 billion crowns of cost cuts already announced, Volvo Cars said it would reduce indirect spending and variable costs by a further 5 billion crowns, with the savings expected by the end of next year. The latest measures will affect about 6 percent of the workforce, including around 2,000 jobs in Sweden, through the end of consultant contracts, natural attrition, and targeted exit packages. Samuelsson told Reuters the latest cuts should be completed by mid 2027, although he did not rule out further measures if the turnaround plan falls short. The Volvo Cars loss therefore leads directly to a smaller workforce and lower spending, rather than to a plan that depends only on higher sales. The company earlier in October scrapped its guidance for full year sales volume and cash flow, which removed the targets that investors had used to judge the year.

Volvo Cars loss and what comes next

The Volvo Cars loss will be tested by the next quarterly results. Investors will read the Volvo Cars loss against the savings plan and the job cuts already announced.