Volvo Cars has abandoned its ambitious target to sell only electric cars by 2030 amid a global slowdown in growth for battery-powered vehicles.
The Geely-owned Swedish group had been the first among traditional carmakers to pledge a complete switch to electric, and remains the most bullish about the transition even as rivals including Ford and General Motors have also walked back on their EV targets.
Jim Rowan, Volvo’s chief executive, on Wednesday blamed changing market conditions and consumer worries over the lack of charging infrastructure for its revised target.
“We will be ready to go fully electric this decade, but if the market, infrastructure and customer acceptance are not quite there, we can allow that to take a few more years,” Rowan said as he showcased Volvo’s new electric and plug-in hybrid flagship sport utility vehicles.
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Sales growth of EVs have slowed globally mainly owing to a lack of affordable offerings with battery-powered cars costing about 20 to 30 per cent higher than vehicles with conventional petrol engines. The declines in sales growth have been particularly acute in Europe, where Germany and other countries have abruptly ended subsidies for EV purchases.
Penetration of battery-powered EVs in Germany is expected to decline slightly from last year to 15 per cent with sales down 20 per cent during the January to July period, according to HSBC. For Europe, it expects EV penetration of 14.8 per cent in 2024, compared with 14.5 per cent last year.
Under its revised target, Volvo will now aim to turn 90 to 100 per cent of its global sales to electric cars and plug-in hybrids by 2030. It will also continue to invest in hybrid technology amid growing consumer demand.
Despite the shift in its target, Volvo said demand for premium EVs had continued to grow and its gross margin on battery-powered cars reached a record 20 per cent in the second quarter. “We have been very clear that fully electric cars also need to be profitable,” chief commercial officer Björn Annwall said. “Our strategy remains the same but it’s also about adjusting to reality.”
Still, analysts have warned that higher tariffs in the US and Europe on Chinese EV imports will probably keep prices high since companies will be forced to produce vehicles in higher-cost plants outside of China. To boost demand, mass volume carmakers have offered cash incentives, which have hurt their margins.
Volvo already has plants in China, Sweden and Belgium, and is constructing a new factory in Slovakia, which will begin producing vehicles in 2026. But to address the rising tariffs, the company said it would produce its EX30 EV model in its Ghent plant in Belgium as well as in China from next year.
Rowan told the Financial Times that the group had enough land in Slovakia to build a new battery plant if it wanted to. Some analysts have speculated that the extra capacity can be used to produce other Geely-owned brands looking to bring production to Europe. “At this point in time, the plan for Volvo is to first build its own cars,” he said, while not ruling out the possibility. – Copyright The Financial Times Limited 2024
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