Volvo has also compromised

Among the many luxury brands, Volvo was once the most aggressive car manufacturer in terms of electrification transformation. However, facing real challenges, Volvo also had to adjust its strategy.

Recently, Volvo announced a new electrification strategy. By 2025, plug-in hybrid and pure electric models will account for 50%-60% of global sales; by 2030, this proportion will increase to 90%-100%, with mild hybrid models accounting for the remaining 0-10% market share.

Previously, Volvo was the first among many fuel car brands at that time to provide a relatively aggressive transformation strategy. According to Volvo's plan, by 2025, the proportion of pure electric models will reach 50%, with the rest being hybrid models; by 2030, only luxury pure electric models will be sold; by 2040, carbon neutrality will be achieved; all pure electric models will be sold only online.

In response to this adjustment in electrification strategy, Volvo Cars CEO Jim Rowan stated that Volvo is still committed to a fully electrified future, but the transition to electrification will not be linear, as the acceptance speed of customers and markets varies.

Some reasons for the adjustment can be seen from Volvo's current sales structure.

From January to August this year, Volvo's global cumulative sales reached 498,464 units, with sales of new energy models accounting for 45.5% of total sales. This means that fuel cars are still its main sales models, and the aggressive electrification strategy will inevitably affect the sales of fuel cars and mild hybrid models.

In addition, Volvo's main sales markets are Europe, China, and the United States. From January to August, sales in the European market were 243,143 units, 100,122 units in China, and 81,029 units in the United States. New energy models sell the most in the European market, accounting for 69.7% of total new energy vehicle sales. However, the European market, which is currently tightening subsidies for new energy vehicles and imposing large tariffs, is facing challenges.

Meanwhile, in the Chinese and American markets, Volvo's aggressive electrification strategy does not seem to be effective.

In the Chinese market, from January to August this year, Volvo's sales of new energy models were only 8,619 units, averaging around 1,000 units per month, accounting for only 8.6% of the total sales in the Chinese market. In the American market, Volvo's sales of new energy vehicles during the same period were 26,346 units, accounting for 32.5%, also lower than the European market.

This means that consumers in these two major markets still prefer Volvo's fuel cars, and there is more potential for plug-in hybrid models in the future.

For example, in the Chinese and American markets, the sales of plug-in hybrid models in Volvo's new energy vehicles are higher than those of pure electric models. Especially in the Chinese market, Volvo's sales still rely on fuel cars.

Furthermore, the landscape of the new energy market in China is undergoing significant changes.

Previously, the new energy market was evenly split between pure electric and hybrid models. However, in the first half of this year, plug-in hybrid vehicle sales in China led the entire new energy market with a growth rate of 85.2%, far exceeding the 11.6% growth rate of pure electric vehicles. As a result, many brands that were previously only in the pure electric field have also started to enter the plug-in hybrid and extended-range fields.

It can be foreseen that in the future, the greater growth potential may belong to hybrid energy forms such as plug-in hybrids, so Volvo naturally does not need to bet all its sales on pure electric models Volvo has already lowered its profit margin and revenue expectations twice this year, with the latest adjustment reducing the operating profit margin expectation from "above 8%" to "7%-8%"; adjusting its electrification strategy is also one of its measures to combat the decline in operating profit margin.

Volvo is not the first company to announce a slowdown in electrification. Brands such as Mercedes-Benz, Ford, General Motors, and others have also slowed down their original electrification processes to varying degrees this year.

The delay in this progress is related to electric vehicle policies worldwide and consumer demand.

In most countries around the world, the charging infrastructure is still in need of improvement, and consumer demand for pure electric models is lower than the industry's expectations; at the same time, on the policy side, countries have been tightening subsidies for electric vehicles since last year.

Last year, in Europe, the UK was the first to announce the cancellation of a £1,500 subsidy for electric vehicles; by the end of the year, France also restricted subsidies for European-manufactured electric vehicles to a maximum of €7,000; subsequently, the German Ministry of Economy also announced the early termination of electric vehicle subsidies on December 18, 2023.

In addition to the cancellation of subsidies, significant tariffs, including those from the EU, have made new energy vehicles, which are already priced higher than fuel vehicles, even less competitive.

In July, the European Commission ruled to impose a temporary anti-subsidy tariff on Chinese-made electric vehicles for four months. This decision will be put to a final vote at the end of October, and if passed, the EU will impose a formal anti-subsidy tariff on Chinese-made electric vehicles for five years.

In North America, the Canadian government has decided to impose a 100% tariff on Chinese-made new energy vehicles starting from October 1, 2024, while the United States has also announced a 100% tariff on Chinese electric vehicles but has not yet determined the official implementation date.

Given the above changes, Volvo's adjustments are also understandable. Previously, Geely had predicted that there is still a window of about 5 years for fuel vehicles overseas, and an overly aggressive electrification strategy would mean losing this market segment.

Of course, the world is changing rapidly, and the automotive market is constantly evolving, so current strategies are not set in stone. Perhaps in the future, with changes in the market and policies, Volvo will provide new strategies for alternative energy forms