Volvo bulks up hybrid lineup as it delays electric-only switch

GOTHENBURG, Sweden — Volvo Cars is betting on hybrid crossovers to carry it to an all-electric future that it now acknowledges is further away than anticipated.

The Swedish automaker will expand its lineup with new longer-range plug-in hybrids. Meanwhile, Volvo will continue to invest in its high-volume mild hybrid and plug-in hybrid XC90 and XC60 — upgrading them with energy-efficient, high-density electric motors and more advanced batteries.

The focus on in-demand hybrid vehicles is a strategic shift for Volvo, which had vowed to sell only electric vehicles by 2030.

The automaker on Sept. 4 joined many of its competitors in walking back its bold EV ambitions. Volvo said it now aims for PHEVs and battery-only models to account for at least 90 percent of its sales in 2030. Automotive News in July first reported that Volvo would delay its transition to an electric-only lineup well into the next decade.

"We're making sure that we're [going to] keep the mild hybrid and the plug-in hybrid technology competitive and in the range until 2030 and beyond, if need be," Volvo Chief Commercial Officer Bjorn Annwall told Automotive News at an event here. "Leadership is about having a clear vision, but it's also about adjusting to realities."

The realities Annwall referenced include slow customer adoption of battery vehicles in key markets such as the U.S. and profit pressure fueled by increased tariffs on Chinese-made EVs and components.

Higher U.S. tariffs on the EX90's battery made in China compelled Volvo to hike the model's price by $3,300 this summer. Volvo also delayed U.S. deliveries of the EX30 crossover to next year after Washington imposed a tariff of more than 100 percent on Chinese EV imports.

"For the BEV transition to increase, you need cost parity between BEV and ICE, and that has taken longer," Annwall said. "Government incentives for EVs in some markets have dropped a lot quicker and sharper than expected."

U.S. sales of Volvo's first-generation electric models cratered 74 percent to 1,981 in the year's first half. In the same period, PHEV sales surged 75 percent.

Volvo CEO Jim Rowan described the road to an all-electric future as "complex." The transition "will not be linear — customers and markets are moving at different speeds," Rowan said.

Volvo executives emphasized they aren't abandoning their commitment to full electrification — just waiting for the market to materialize.

"2030 is not a strategy," Annwall said. "The strategy is to become a fully electric company. 2030 is just a point in time."

Volvo's new longer-range PHEVs would likely be based on the scalable product architecture platform, known as SPA1, that underpins its current PHEVs.

"SPA1 is a very flexible architecture," said Erik Severinson, Volvo's chief product and strategy officer. "We can keep upgrading SPA1 to even longer-range PHEVs."

Severinson said the electric-only range of the next-generation PHEVs would be a "significant upgrade" from the XC90's 33 miles.

PHEVs are key to Volvo's shift to full EVs in many markets including the U.S.

"Many people who drive PHEVs are more likely to move into a BEV because they've learned to charge the vehicle," Severinson said.

Volvo's mild and plug-in hybrid XC90 and XC60 crossovers remain the sales drivers for the brand, delivering nearly 60 percent of U.S. sales in the first half of the year.

Yet the models haven't been redesigned in nearly a decade. It's unclear whether the XC90 and XC60 will get pricey next-generation models now that Volvo's shift to full battery power is extended.

"It would make sense to make targeted adjustments to some of the offerings," Annwall said. "What those are and when they will come, stay tuned."

But the hybrid models will benefit from the new longer-range batteries, energy-efficient electric motors and the technology backbone Volvo is developing for its next-generation electric models.

"You need brain-lifts rather than face-lifts; that's what consumers care about," Annwall said. "We do a lot of the brain investment on the electric side, and we can piggyback on that."

That strategy is reflected in the recent makeover of the XC90. The three-row flagship, revealed Sept. 4, arrives early next year with improved suspension and design cues from the battery-powered EX90.

Severinson said similar upgrades are planned for the electrified XC60 and XC40.

This strategy allows Volvo to "deliver a consistent and improved customer experience to our current cars without requiring major investment," he said.

Volvo could tap platforms from parent Geely Group to expand its PHEV range, sources familiar with the plan told Automotive News in July. In late May, Geely finalized a joint venture with Renault Group to develop and build more efficient internal combustion and hybrid engines.

"We want the core Volvo lineup to be underpinned by core Volvo technology," Annwall said. "If there is a great platform from Geely or somebody else on which we can build a great top hat, we might do it."

In the near term, Volvo will maintain parallel hybrid and battery-only vehicle lineups. The product plan involves five next-generation EVs, including a low-slung ES90 sedan followed by the EX60 midsize crossover that arrives in 2026.

"We will have a full electric portfolio that will cover all the important segments where we are today and where we see growth in the future," Severinson said.

The three unannounced EVs are expected to be based on the SPA3 platform that will debut on the EX60 and is the company's most advanced.

SPA3 vehicles will be powered by Volvo's next-generation, internally developed e-motors. The automaker said it aims for 93 percent efficiency with the new motors, up from 85 percent in its first EVs and 91 percent now. SPA3 models will have higher-density battery cells that deliver a longer range. The battery pack will be part of the vehicles' body structure, reducing weight and cost and creating more interior space.

In the future, Volvo's lineup will feature eight core models with eight-year product cycles. Each year, Volvo will release a new model and refresh an existing one, the automaker said without providing specific timing.

"We will focus on continuous improvement over variant complexity," Severinson said.