Volvo Cars plunges 29% as CEO says China sales slump came 'faster than we thought'

Volvo Cars said Friday it plans to cut 2,500 jobs after a sharp decline in its Chinese market weighed on third-quarter earnings.

The Swedish automaker reported an operating loss of 5.6 billion Swedish Kronor ($563.7 million) in the third quarter, down from an operating profit of 6.4 billion Swedish Kronor in the previous period.

The company cited a deteriorating environment led by "tougher" market conditions in China and the U.S., which "negatively affected free cash flow."

Volvo Cars shares were last down 28.8%.

"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," Volvo Cars CEO Håkan Samuelsson told CNBC on "Squawk Box Europe," on Friday.

Chinese consumers are now looking for "domestic alternatives," which have become stronger and more competitive, the CEO said. "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."

He added that costs must be competitive and that Volvo Cars needs to share some platforms with its Chinese parent company Geely, and develop key software in China that includes infotainment and driver-assistance systems. "If you don't have that, I think you cannot sell cars in China."

Volvo Cars' revenues in China fell almost 50% year-on-year as premium brands faced "hypercompetition" from new Chinese rivals, which also put severe pressure on pricing, the company said.

Meanwhile, in the U.S., the automaker cited negative effects from tariffs and fewer customer incentives to buy electric cars, putting pressure on profit margins.

Volvo Cars said it is looking to cut 5 billion Swedish Kronor in costs by eliminating 2,500 jobs globally, with 2,000 of those jobs based in Sweden.