Volvo withdraws plan to sell only electric cars by 2030 as demand falls

Swedish carmaker Volvo Cars has abandoned its plan to sell exclusively electric vehicles by 2030, due to the decline in demand for cars powered exclusively by batteries.

Following Wednesday’s announcement, Volvo shares fell more than 4% and is down 12% over the past six months. The company also reported disappointing first-quarter results and offered weak forecasts during its second-quarter earnings call.

Instead of aiming to become a fully electric carmaker, Volvo now aims to have “between 90% and 100% of its turnover “The global economy in 2030 will consist of electrified cars,” which includes a mix of fully electric and hybrid models plug-in.

The remaining 0-10% will enable a limited number of mild hybrid models, if necessary. Volvo still hopes produce between 50% and 60% of vehicles electrified by the middle of this decade, which would allow it to become a fully electric car manufacturer when “conditions are right.”

The company said 26% of its products are fully electric cars, the highest rate among its high-end competitors. Its total share of electrified vehicles, including electric vehicles and plug-in hybridsaccounted for 48% in the second quarter of this year.

Increasing demand for hybrid vehicles

The growing demand for hybrid vehicles and the ever increasing lower affordability of electric cars cigars have been putting pressure on the profit margins of electric car makers.

Tesla, the famous electric vehicle manufacturer, has experienced a continued decline in profit margins and a slowdown in its growth from 2023. Its CEO, Elon Musk, has pointed out a change in consumer preferences, moving from 100% electric cars to hybrids.

Amid rising consumer demand and a price war in China, automakers are facing macroeconomic headwinds. The industry is also experiencing uncertainties due to new import tariffs on Chinese-made electric vehicles imposed by the EU and the US, with China promising reciprocal measures.

The appeal of owning an electric vehicle has “dimmed”

“It is clear that the transition to electrification will not be linear, and customers and markets are moving in a different adoption speeds“Volvo said. “We are pragmatic and flexible while maintaining a leadership position in the electrification and sustainability industry.”

The government grants renewable energy vehicles have previously incentivized consumers to buy fully electric cars. However, with the expiration of these incentives and the falling crude oil pricesthe appeal of owning a fully electrified vehicle has diminished.

Volvo noted: “The slower than expected rollout of charging infrastructure, the withdrawal of Government incentives in some markets and the additional uncertainties created by recent tariffs on electric vehicles in several markets. With this in mind, Volvo Cars continues to see the need for stronger government policies and stable to support the transition to electrification.”

Volvo Cars, owned by China’s Geely, is the latest major carmaker to cut its production ambitious transition plans towards a purely electric vehicle, while maintaining its commitment to achieving zero net greenhouse gas emissions by 2040.

In July, Luca De Meo, CEO of French carmaker Renault, warned that customers are not yet ready to switch to battery-powered vehicles. He called for more flexibility in the timetable, referring to Europe’s energy transition and the goal of switching to electric vehicles by 2035.

German luxury carmaker Porsche has also lowered its target of selling 80% fully electric vehicles. conventional car manufacturerslike Ford and Fiat, have also expressed concerns that EV plans for 2030 may be too ambitious.