Volvo bets on EX90 crossover to reverse EV sales slide

NEWPORT BEACH, Calif. — For a brand that has vociferously staked its future on electric vehicles, Volvo Cars is struggling with battery power in the key U.S. market.

In the first half of the year, deliveries of the electric XC40 and C40 crossovers cratered 74 percent to 1,981 vehicles.

But Michael Cottone, Volvo Cars' U.S. boss, hopes to change that trajectory with a pair of next-generation crossovers that will bookend the brand's EV lineup and reach crucial new audiences.

At the top end is the new three-row EX90 flagship expected to glide into stores in late 2024. It will be followed by Volvo's most compact and least expensive model — the EX30 crossover — in the second half of next year.

"[The EX90] is the first car that we will have launched and developed outside of Europe in our company's almost 100-year history," Cottone said at an Aug. 21 media event in Southern California. "This car was designed for the U.S. market and then built in the U.S. market."

Cottone said the seven-passenger crossover segment is a growth engine of the Swedish brand in the U.S. The gasoline-powered XC90 was Volvo's bestselling model last year, accounting for nearly one-third of the brand's total volume.

With the electric EX90, "we are offering another car to another subset of consumers that we don't have today," Cottone said. "That will create incremental volume coming into our showrooms and help expand our brand."

Volvo dealer Matthew Haiken said the EX90 will resonate because it is an evolution of a familiar design. The new model has the DNA of the XC90, which Haiken said has become a classic like the Range Rover or Porsche 911.

"Most EVs look like computers on wheels," said Haiken, owner of Prestige Collection, which operates Volvo stores in East Hanover and Englewood, N.J. "The EX90 is the antithesis of the Tesla Model X."

The bullishness aside, the EX90 arrives in U.S. stores when EVs aren't gaining much share. On average, EVs were taking nearly three months to sell as of July, according to data from Edmunds.

The segment is suffering from oversupply and a bruising price war triggered by Tesla. Automakers from Ford Motor Co. to Mercedes-Benz are recalibrating their electric ambitions as anticipated volume and profits have failed to materialize.

Boston Consulting Group estimates most automakers lose about $6,000 on each EV they sell for $50,000, after accounting for customer tax credits. Edmunds said the average sticker price of $75,165 is being discounted to $68,157.

It wasn't supposed to be that way.

The EX90 was initially expected to enter production at Volvo's U.S. factory in Ridgeville, S.C., last year. But software-integration issues plagued the technology-packed model that debuts a new electric platform, a lidar system and bidirectional charging capability. Production eventually began in June.

"It's been a long time to sit and wait for a car to come out," Haiken said. "As EV prices normalize, consumers are afraid they are going to miss a great deal."

Cottone acknowledged the frustration but assured dealers "their business with this car is going to grow."

The executive vowed to be disciplined with volume to ensure flagship-worthy margins. Supply will be targeted at EV strongholds in California, the Northwest and the Mid-Atlantic region.

"We are going to go where the demand is," Cottone said.

Aligning supply with demand will be key to maintaining pricing power and profitability.

"The most important thing is … to make sure that we get the right product to the consumers at the right time," Cottone said. "It's finding that right price point and lease payment for the customer to buy."

Increased U.S. tariffs on the EX90's CATL battery made in China forced Volvo to hike the model's price by $3,300 this summer. The EX90 starts at $81,290 with shipping.

Cottone said the EX90's third-party residual value estimates are similar to that of the XC90 plug-in hybrid. "When you have a great car and you price it right, you'll get a good residual value," he said.

Edmunds data shows the average MSRP on a 2024 plug-in hybrid XC90 lease sold in August was $78,752. The assigned residual value was 63 percent, or $49,614.

Even as Volvo plows ahead with its long-term bet on EVs, the brand is pushing its gasoline-assisted hybrids to meet near-term demand.

"We are selling more plug-in hybrids than we ever had," Cottone said. "We are selling them at a higher mix than we have before in states like Florida and Texas."

Plug-in hybrids accounted for 27 percent of Volvo's U.S. sales in the first half of the year, 71 percent more volume than a year ago.

"We want to build the cars that the consumers want and right now they are telling us they want plug-in hybrids," Cottone said.

Volvo sees PHEVs as the path to an all-electric future.

"The plug-in hybrid is the transition vehicle," Cottone said. "The more customers that we can put in plug-in hybrids and get them to experience driving [it] as an EV … the better chance we have of converting them to EVs in the future."