According to Bloomberg's report on October 23, the stock price of Swedish automaker Volvo Cars plummeted by more than 30%, reaching a record low. Previously, the company's CEO stated that the market for Western-developed cars in China was rapidly shrinking, which prompted Volvo to decide to lay off another 2,500 employees.
In the third quarter of this year, Volvo's deliveries in China decreased by more than 40%. Chinese domestic brands dominate the electric vehicle market. Volvo, controlled by Geely China, currently has a market value of 29.8 billion Swedish kronor (approximately 2.68 billion US dollars), which is a 80% decrease compared to when it went public five years ago.
Volvo CEO Hakan Samuelsson said during a analyst conference call on Friday: "The old method of developing global models in Europe and selling them at high prices in China is no longer a way to succeed for anyone. That era is over."
This layoff involves approximately 6% of Volvo Cars’ employees and is part of the company’s plan to further reduce costs by 5 billion Swedish kronor. The latest round of layoffs targets employees in Sweden. Previously, Volvo Cars announced that it would cut around 3,000 jobs last year.
Samuelson admitted that he underestimated the speed of transformation in the Chinese automobile market. In today’s Chinese market, even having Chinese shareholders does not guarantee success for a European automaker. Automobile companies must now design models specifically for the Chinese market in order to have a chance of surviving in the competition.
Samuelson said that in the future, Volvo will rely on the technology and vehicle platforms provided by its Chinese parent company to participate in market competition. Although Volvo has been listed, Geely still holds nearly 80% of its shares, which also contributes to the volatility of the company's stock price.
He said in an interview: "In the Chinese market, you must develop products that are tailored to local markets and equipped with Chinese software. In this regard, we certainly have a huge advantage, as we can collaborate with Geely to jointly develop these cars."
Volvo has further increased its cost cuts, similar to the measures taken by manufacturers such as Volkswagen and BMW. These companies are striving to streamline their operations in order to cope with the increasingly fierce competition in the Chinese market. At the same time, they are also strengthening cooperation with local Chinese companies, expanding their local R&D teams, and developing product features that better meet the preferences of Chinese consumers. Samuelson's remarks suggest that these measures may still be insufficient.
Currently, there are over 100 domestic car brands competing with consumers in China. The fierce competition forces car manufacturers to significantly shorten the development cycle of new models and reduce prices. Western car manufacturers such as Volkswagen have reacted relatively slowly, falling behind in certain features that Chinese consumers value, including in-car viewing screens and advanced voice recognition systems.
Chinese car brands are winning more and more consumers with their electric vehicles that offer lower prices, advanced digital features, and models that cater to local consumer preferences. In contrast, Western car manufacturers often rely on globally produced models that are more expensive and require longer development cycles, making it difficult for them to keep up with market changes.
The difficulties faced by Volvo became evident in its financial reports released on Friday. The company went from a profit to a loss, with a loss amount far exceeding analysts' expectations. In addition to problems in the Chinese market, Volvo also mentioned the cost pressures caused by US tariffs, as well as the impact of the US withdrawal of subsidies for electric vehicles.
In order to get back on track, Volvo plans to launch 7 new models in Western markets by the end of 2030, and 6 models specifically designed for local consumers in the Chinese market.
In Europe, despite the increasing competition from Chinese automakers, Volvo has still achieved sales growth. The EU's measures to restrict the import of hybrid vehicles from China may only provide a temporary respite, as Chinese automakers like BYD are establishing production bases in Europe.
