Volvo rethinks the future of electric cars due to falling demand

In a surprising pivot, Volvo Cars has shelved its ambitious goal to sell only electric vehicles (EVs) by 2030, citing slowing demand for fully electric cars.

The decision marks a significant shift in strategy for the Swedish automaker, which had positioned itself as a leader in the electrification movement within the automotive industry.

Volvo’s initial plan was bold – transitioning entirely to battery-powered vehicles by the end of the decade. However, with consumer interest in pure EVs softening, the company is now aiming for a more flexible target. By 2030, Volvo expects 90 to 100 per cent of its global sales to come from electrified vehicles, which includes both fully electric and plug-in hybrids.

This updated target reflects Volvo’s acknowledgment of market realities. While the company remains committed to EVs, it now allows room for a small percentage of mild hybrids in its lineup.

“We are pragmatic and flexible while retaining an industry-leading position on electrification and sustainability”, a Volvo company statement said.

Volvo’s shares fall

The decision comes as the company’s shares fell by over 4 per cent following the announcement, and its stock price has dropped 12 per cent in the last six months.

Hybrid cars on the rise

Volvo’s shift highlights a growing trend in the automotive industry – hybrid vehicles are increasingly preferred over fully electric models. This shift is partly driven by the rising cost of EVs and the slower-than-expected development of charging infrastructure, which has left many consumers hesitant to go all-electric.

At present, 26 per cent of Volvo’s product lineup is fully electric, which is the highest among premium automakers. However, when you include plug-in hybrids, nearly half (48 per cent) of Volvo’s second-quarter sales this year were electric models.

Despite these solid numbers, the broader EV market is facing challenges. Tesla, a pioneer in the space, has seen its profit margins shrink, and CEO Elon Musk has acknowledged that many consumers are gravitating towards hybrid options.

The weakening demand for EVs isn’t just about consumer preference. Automakers, including Volvo, are grappling with macroeconomic challenges, such as a price war in China and new EU and U.S. tariffs on Chinese-made EVs. These factors are creating headwinds for the industry, with China already pledging retaliatory measures.

Further compounding the issue is the end of government subsidies for renewable energy vehicles, which had previously helped offset the higher cost of EV ownership. With these incentives drying up and oil prices remaining relatively low, the allure of fully electric cars has diminished. Volvo, like many other automakers, has urged for stronger and more consistent government policies to facilitate the transition to cleaner vehicles.

Volvo is not alone in reevaluating its all-electric ambitions. Other major car manufacturers have also walked back their aggressive timelines for full electrification. Renault’s CEO, Luca De Meo, recently noted that customers are not yet ready to fully embrace battery-powered cars, suggesting that the industry needs more time to make the green transition. Meanwhile, German luxury brand Porsche has scaled back its target of selling 80 per cent fully electric vehicles, while Ford and Fiat have also expressed concerns over whether a 2030 deadline is feasible.

The road ahead for Volvo and EVs

Despite these challenges, Volvo is still aiming to produce 50 to 60 per cent electrified vehicles by mid-decade, a move that could better position the company for an eventual all-electric future when conditions improve. The automaker has reaffirmed its commitment to achieving net-zero greenhouse gas emissions by 2040, in line with global sustainability goals.