Volvo Cars set an ambitious target in 2021 to become a fully electric car manufacturer by 2030. Following a shift in consumer demand, the automaker has adjusted its target now aiming for 90-100% of global sales to come from electrified cars by 2030. This new target includes a mix of fully electric and plug-in hybrid vehicles with a small allowance (0-10%) for mild hybrids, if necessary.
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Volvo’s decision comes during a declining demand for pure battery-powered cars. Many consumers are showing a preference for hybrid vehicles, which offer a balance between traditional internal combustion engines and electric powertrains.
Rising costs of electric vehicles compounded by a lack of sufficient charging infrastructure in many regions have decreased the appeal of fully electric cars.
The automaker acknowledged that consumer adoption of electric vehicles is slower than expected with various regions adopting electrification at different speeds.
The decision to scale back on its fully electric ambitions had an immediate impact on Volvo’s stock price. Volvo’s shares dropped by more than 4%.
Over the past six months, Volvo’s share price has declined by 12%. Disappointing first-quarter earnings and weak guidance during its second-quarter earnings call added to the financial strain.
Volvo Cars already has five fully electric vehicles (EVs) available for consumers, the EX40, EC40, EX30, EM90 and EX90. Another five electric models are currently in development.
Volvo maintains its long-term goal of becoming a fully electric carmaker. The company has also committed to reaching net zero greenhouse gas emissions by 2040.
Volvo aimed for 100% of its lineup to be fully electric by 2030. However due to changing market conditions and customer demands, Volvo has adjusted this target.
By 2030, it now aims for 90-100% of its global sales to consist of electrified cars, which include both fully electric vehicles and plug-in hybrid models essentially, all vehicles with a charging cord.
Volvo acknowledges that some markets may still require mild hybrid vehicles. Up to 10% of Volvo’s lineup in 2030 could include mild hybrid models if needed.
During the second quarter of 2024, fully electric vehicles accounted for 26% of Volvo’s total sales, the highest share among premium automotive brands. In addition, the combined sales of EVs and plug-in hybrids represented 48% of the company’s total sales volume.
By 2025, Volvo expects electrified vehicles both fully electric and plug-in hybrids to make up 50-60% of its total sales. The company plans to continue rolling out more electric models throughout the decade.
The electric vehicle industry has been impacted by a combination of global economic factors including inflation, rising production costs and supply chain disruptions.
Tariffs on Chinese-made electric vehicles (EVs) imposed by the European Union and the United States have complicated the industry’s outlook.
Volvo relies on Chinese factories for its production and the new tariffs have introduced additional costs and uncertainties.
In response China has pledged retaliatory tariffs creating a challenging trade environment that affects Volvo and other automakers with Chinese ties.
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Volvo’s pivot to hybrid vehicles comes as a result of increasing consumer demand for vehicles that combine electric and traditional gasoline engines.
Hybrid vehicles particularly plug-in hybrids offer consumers the benefit of electric driving with the flexibility of longer ranges provided by gasoline engines.
This makes them a more appealing option in regions where charging infrastructure is still underdeveloped. Volvo is positioning itself to meet this demand by ensuring that a huge portion of its product lineup will include hybrid vehicles.
Despite its revised target Volvo remains committed to achieving net zero greenhouse gas emissions by 2040. The automaker continues to lead the premium car segment with one of the highest shares of electric vehicles.
As of the second quarter of 2024, 26% of its product offerings were fully electric, while electrified vehicles accounted for 48% of its total sales.
Plug-in hybrids are an important part of Volvo’s transition strategy. These vehicles allow customers to experience electric driving without fully transitioning to an all-electric vehicle.
According to Volvo, around 50% of the kilometers driven by its PHEV customers are powered by electricity alone.
Although mild hybrids will remain a small percentage of Volvo’s lineup, they will serve customers who are not yet ready to make the switch to fully electric or plug-in hybrid models.
Volvo has also updated its carbon dioxide (CO2) reduction goals. By 2030, Volvo aims to reduce CO2 emissions per car by 65-75% compared to a 2018 baseline. This is a slight revision from the company’s earlier goal of a 75% reduction.
By 2025, Volvo targets a 30-35% reduction in CO2 emissions per car, a revision from its previous goal of a 40% reduction by this year.
Volvo is working closely with its suppliers to reduce emissions across its entire value chain including emissions from materials and production processes.
Volvo’s small electric SUV, the EX30, continues to perform well in the European market ranking as the third best-selling EV in the region.
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