Volvo Cuts Over 10% of Shanghai Workforce with N+3 Compensation Plan

The severance package is confirmed as “N+3” months of salary (N = years of service), plus an additional 0.5 month for unused annual leave. Social insurance contributions will continue through the end of July.

Volvo’s layoffs in China have now been largely completed.

The layoff plan was rolled out in early July, with the compensation package confirmed as “N+3” months of salary (N representing the number of years of service), plus an extra 0.5 month for unused annual leave. Social insurance payments will be made through the end of July.

This round of layoffs primarily affects Volvo’s technical and R&D centers in Shanghai, with impacted roles spanning engineering, R&D, and supply chain management.

These cuts are part of Volvo’s global restructuring plan announced in May 2025, which aims to eliminate approximately 3,000 positions worldwide—1,200 in Sweden and 1,800 in other markets (including outsourced consultants). The company has earmarked 18 billion SEK (about $1.9 billion) for this initiative, with the goal of reducing fixed costs and optimizing organizational structure. The restructuring process is expected to be completed by 2026.

Front view of a Volvo XC70 illuminated by soft lighting against a dark background. — The new Volvo XC70.

According to insiders, the China layoffs stem from a strategic shift, especially in electric vehicle (EV) development. Some employees believe the downsizing of engineering and R&D teams is linked to the suspension of certain China-based EV projects, possibly due to investment pressure.

While the exact number of layoffs has not been officially disclosed, employee feedback suggests the proportion varies significantly across departments—from 10% to as high as 70%. The process was reportedly swift: notices were issued on June 30, 2025, and most terminations were finalized by July 2.

In recent years, Volvo has faced mounting pressure in the Chinese market due to sluggish sales. In 2024, Volvo sold 156,400 vehicles in China, marking an 8% year-over-year decline. This trend continued into 2025, with Q1 sales in China down 12% year-over-year, and global sales slipping 6%.