Volvo has announced that it is shelving its plan to rapidly electrify its product line until it is only manufacturing electric cars by 2030. The ambitious electrification plan would have seen Volvo ramp up electric vehicle production and wind down the production of fossil fuel vehicles over the next several years until, by the end of the decades, those types of vehicles were completely eliminated from the automaker’s lineup.
Volvo first announced the target three years ago, but the automaker says “changing market conditions” have forced it to go back to the drawing board. Rather than an electric vehicle-only lineup, Volvo will most likely be manufacturing hybrid electric vehicles alongside its usual gas-powered cars by 2030.
The Swedish automaker’s decision comes soon after the global electric-vehicle industry was rocked by waning demand and low sales that left many automakers fielding massive losses. Additionally, the sector is also dealing with uncertainty after three major markets placed import tariffs on Chinese EVs. Volvo now joins the list of established carmakers that initially tied themselves to incredibly tight electrification timelines but are now reworking their plans due to lower-than-expected EV demand.
According to Volvo, at least 90% of its lineup will comprise both plug-in hybrids and electric cars by 2030. Volvo chief executive Jim Rowan says the Swedish company still believes electric vehicles represent its future but noted that with markets and consumers moving at different speeds, the transition to electric won’t be linear. A changing business climate characterized by factors such as reduced consumer incentives and glacial rollout of public EV-charging infrastructure contributed to Volvo’s decision to shelve its EV-only plan.
Speaking to BBC’s Today program, independent equity analyst Anna McDonald noted that limited charging infrastructure keeps many consumers from transitioning to EVs. Furthermore, governments are withdrawing EV incentives and subsidies even though electric vehicles are still more expensive than internal combustion engine (ICE) cars.
China is the only country that has figured out how to develop affordable electric cars, but import tariffs imposed by the European Union, the United States and Canada mean these cars can’t reach hundreds of millions of consumers in key markets. Western carmakers, on the other hand, are still spending a fortune to manufacture EVs and taking tens of thousands to hundreds of thousands of dollars in losses just to get the cars off the lot. With the global EV market in such a condition, it was a question of when and not if Volvo would lower its electric-vehicle ambitions.
It would be interesting to see what measures purely EV startups such as Cenntro Electric Group Ltd. (NASDAQ: CENN) are taking to thrive in these challenging market conditions, which are driving legacy auto manufacturers such as Volvo to rethink their electrification plans.
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