DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

Volvo Cars shares plunged 26% after the Swedish automaker disclosed plans to eliminate 2,500 jobs and reported a sharp third quarter operating loss. The market rout followed a brutal deterioration in China, alongside pressure in the United States.

The company recorded an operating loss of 5.6 billion Swedish kronor, equal to $563.7 million, during the third quarter. That marked a punishing reversal from an operating profit of 6.4 billion Swedish kronor in the previous period.

Volvo Cars, which is owned by China’s Geely Holding, blamed a deteriorating business environment led by tougher conditions in China and the U.S. The company said those conditions negatively affected free cash flow.

China was the clearest source of pain. Volvo Cars said revenue in the country fell almost 50% compared with a year earlier as premium brands confronted what the company called “hypercompetition” from new Chinese rivals.

Those competitors also placed severe pressure on vehicle pricing, adding to Volvo Cars’ difficulties in the market. CEO Håkan Samuelsson said the pace of change in China had caught the automaker off guard.

“It’s really a lot about the Chinese market, of course, where the change has come faster than we thought, and really now we can see that selling global cars developed in Europe and China will not work, and then this is affecting all the Western players in China,” Samuelsson told CNBC on “Squawk Box Europe,” on Friday.

Samuelsson said Chinese consumers are increasingly looking for domestic alternatives that have grown stronger and more competitive. His comments pointed to the need for Volvo Cars to reconsider how it develops and sells vehicles in China.

“We need a new strategy in China... it has to be a more regional structure, a more empowered region, and we need regionally adapted cars.” The proposed approach would give the region greater authority while shifting vehicle development toward local market demands.

Samuelsson also said costs must be competitive and that Volvo Cars needs to share some platforms with its Chinese parent company, Geely. The company also needs to develop important software in China, including infotainment and driver assistance systems.

“If you don’t have that, I think you cannot sell cars in China.” His warning captured the scale of the competitive challenge facing Western automakers as Chinese consumers turn toward increasingly capable domestic brands.

Conditions in the U.S. added another layer of pressure. Volvo Cars cited negative effects from tariffs and fewer customer incentives to purchase electric cars, developments that weighed on the automaker’s profit margins.

In response, Volvo Cars is seeking 5 billion Swedish kronor in cost reductions and will eliminate 2,500 jobs worldwide. Sweden will absorb most of the cuts, with 2,000 of the affected positions based there.

Samuelsson connected the workforce reduction to the company’s broader strategic changes. “It is really a consequence of this development, our long-range strategy,” he told CNBC.

Volvo Cars plans to build stronger and more empowered regional operations, a structure that leaves less need for the same level of resources at the company’s central corporate operation. “So we need a leaner central administration.”

The job cuts therefore accompany Volvo Cars’ attempt to lower expenses while shifting more power toward individual regions. The company’s China strategy would also rely more heavily on Geely platforms and software developed specifically for the Chinese market.

The combination of an operating loss, collapsing China revenue, U.S. pressures and a sweeping cost reduction plan left Volvo Cars facing a severe test. With shares down 26%, investors delivered a stark response to the speed and scale of the deterioration.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.