Why Volvo Cars is rethinking its EV game plan

Volvo Cars finds itself at an interesting crossroads in the U.S. market, with sales down and its margin and revenue projections cut for the second time this year. Once positioned as an innovator set to lead in electrification and modern mobility solutions, Volvo is now revisiting its game plan amid a changing market.

• In February, Volvo Cars announced that it would cut its stake in its EV affiliate, Polestar, to 18% and stop funding the car company. Volvo previously owned 48% of Polestar.  

• In September, the Swedish automaker announced that it was scrapping its plans to go fully electric by 2030.

What they’re saying: “We reduced the ambitions we had set to go 100% electric by 2030,” Vanessa Butani, head of global sustainability at Volvo, said in an interview. “We’re pushing that back a bit, not committing fully to a year right now, because we see that even though we’re fully ready to do it, the market’s not really with us.”

Zooming out: Volvo also lost eligibility for the federal EV tax credit after the passage of the Inflation Reduction Act in 2022, which mandated that electric vehicles and batteries be manufactured in the U.S. to qualify. Many manufacturers have since announced plans to build EV battery factories in the U.S., but Volvo, which is owned by China’s Geely, has not followed suit. 

What it means: Volvo’s highly anticipated compact EX30 SUV, which was set to debut at a starting price of $35,000 in the U.S., is built in China. But with the Biden administration’s plans to quadruple tariffs on Chinese-made EVs to 100%, Volvo’s rollout strategy has been disrupted. Now, the automaker is scrambling to shift production to Europe, meaning the EX30 likely won’t arrive in the U.S. until late 2025.

More challenges: As one of a few remaining niche legacy nameplates from the 1980s heyday when these types of car brands offered something more unique in the market, Volo Cars now finds itself confronting some of the same challenges that new EV-based car companies face – the need to establish a more clearly defined customer base, as consumer EV sales grow at a slower pace than predicted. 

• Nearly 45% of Volvo Cars current available line-up (four models) are fully-electric-vehicles. Roughly 22% of the line-up (two models) are plug-in hybrids. The lineup includes three gas /mild hybrid models, accounting for roughly 33% of the company’s current product line-up. 

• Electrification has spawned a host of new “luxury” car companies, many of them offering products and ideas that reflect many of the same brand tenets as Volvo Cars. 

On a positive note: Amid some of its challenges in the U.S., Volo Cars also touts some recent notable achievements in the market, which speak to the viability of the brand.      

• Despite a 2.1% decrease in U.S. sales in August year-to-date, Volvo’s sales of hybrid and electric models were up 47.1% compared to August 2023 — a strong indication that the company can be competitive in the market.  

• The Insurance Institute for Highway Safety (IIHS) recently bestowed the 2024 Volvo XC90 with its highest honor, as one of three SUVs Top Safety Pick+.

Looking forward: Volvo Cars recently announced plans to launch 10 models by 2026. They will include new vehicles, updated models, and electrified variants of older models. That certainly is a good start to turning things around in the U.S., but properly positioning those vehicles in the market with consumers will be important as well.    

Bottom line: Volvo’s change in strategy reveals how tricky it is to balance ambitious electrification plans with profitability. The real test? Whether Volvo can regain its footing and prove it can still lead in innovation and grow its market share.

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