The job reductions will be achieved by cancelling agreements with consultants, not replacing those who retire, and making redundancies, the company said.
"The important thing to point out here is that this is going to be done through voluntary redundancies and through being extremely restrictive about new hires, although we're not going to go into exactly how the mix will look," the company's finance director, Fredrik Hansson, told TT.
He said the majority of job reductions would be in the Gothenburg area, and that they would involve white collar workers rather than production workers.
Over the last three months, the company has posted an operating loss of 5.6 billion kronor, down from a profit of 6.4 billion in the same period last year.
Shares in Volvo Cars plunged Friday after it said US tariffs and strong competition from local brands in China pushed it into a third-quarter loss.
Volvo Cars, controlled by Chinese group Geely, reported revenue of 66.9 billion kronor for the third quarter, down nearly 23 percent from the same period last year.
Shortly after 8:00am GMT on Friday, Volvo Cars shares were down almost 30 percent.
"We continue to operate in a very tough environment with strong external challenges: de-globalisation, hypercompetition and climate change," Volvo Cars CEO Hakan Samuelsson said in a statement.
In response, the company announced a new five-billion-kronor savings plan it said would lead to about 2,000 job cuts in Sweden and 500 more globally, "through natural attrition and by targeted exit packages to employees".
The company, which had bet heavily on electric vehicles, said the removal of consumer incentives for EVs in the United States under President Donald Trump had also hit its margins.
In 2024, Volvo Cars dropped a plan to transition to exclusively EV sales by the end of the decade.
"We are convinced that we have the right long-term strategy addressing these challenges," Samuelsson said.
"However, in the short term, with severely challenged volumes, we need to reinforce our turnaround plan with additional decisive actions, lowering our break-even point and improving cash flows to make us more resilient."
Struggling along with other European auto companies in the face of a difficult global landscape, Volvo Cars last year announced an 18-billion-kronor cost-cutting plan.
The company said in September that Samuelsson would resign when his contract ends, with Skoda Auto CEO Klaus Zellmer set to replace him "no later" than October next year.
While Volvo Cars announces major layoffs, truck giant AB Volvo took an optimistic view of the future, both in Europe and North America.
Since 1999, AB Volvo, also known as Volvo Group, is a separate company from Volvo Cars, although both use the Volvo logo.
AB Volvo does, however, face a fair number of challenges ahead, CEO Martin Lundstedt told Swedish newswire TT.
"There is cost pressure, unfortunately, given the conflicts occurring around the world," he said.
Volvo Truck orders rose to 46,918 vehicles in the third quarter, up from 37,134 a year earlier.
"It is very encouraging that the underlying business is performing strongly. We are seeing order intake remain at healthy levels across several regions and business areas," Lundstedt said.
In both the truck and construction equipment segments, the company anticipates an upturn in 2027, in both Europe and North America.
"But, of course, there is no shortage of challenges," added Lundstedt.
He pointed to rising costs—including those for freight and logistics—as a consequence of wars and conflicts. Issues surrounding tariffs and future trade policies also loom in the background.
"And then, naturally, there are the broader objectives: continuing to drive the transition toward sustainable, fossil-free transport, Lundstedt said.
"The primary factors that will determine the pace of this transition are the necessary enablers: charging infrastructure, the availability of sufficient green energy within the power grid, and ensuring our electrical networks can handle the increased load as everything begins to accelerate," he said.
Volvo's goal is for 35 percent of all vehicles sold to be fully electric by 2030.
The truck giant reported an adjusted operating profit of SEK 14.7 billion for the third quarter. This compares to SEK 11.7 billion for the corresponding quarter last year.
According to Bloomberg, analysts had expected an average adjusted operating profit of SEK 14.8 billion.
“We are seeing 7 percent organic growth, which resulted in net sales of nearly SEK 120 billion for the Group during the third quarter," said Lundstedt.
“It has been a strong quarter for the Volvo Group,” he added.
Net sales for the quarter rose to SEK 119.5 billion, up from SEK 110.7 billion.
With reporting from Agence-France Presse
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