Volvo Australia drops its ambitious 2026 EV strategy

Citing volatile market conditions, Volvo Cars Australia (VCA) has pulled back from its industry-leading commitment to only sell battery-electric vehicles as of 2026.

The decision, forecast by carsales earlier this week, was communicated to the Australian Volvo dealer network by video call earlier today and means the local operation will sell mild hybrid and plug-in hybrid models alongside its EVs well into the second half of the decade.

“There’s no point us going fully electric if our consumers aren’t ready for it,” VCA managing director Stephen Connor told carsales, though he made it very clear the brand would still go fully electric eventually.

“We are going to take a pragmatic approach on this,” he said.

“I have got no doubt that we will be fully electric earlier than [Volvo] global and I have got no doubt we will be fully electric sooner than most car manufacturers in Australia.

“We are fully committed to the strategy … but what we’ve come to realise pragmatically is can we achieve it by 2026?

“Even if the factory produces all the cars we are coming up with and they can deliver them to our shorelines, we are going to struggle to get there is the honest answer.”

The first result of the policy change will be the launch of the updated XC90 large SUV in January with both a mild and plug-in hybrid (PHEV) powertrains.

“The XC90 was never part of our plan in Australia and some other markets,” Connor said.

“So we are agile enough to change our stance and our operational plan.”

He confirmed other models may gain an extension of their local lifespans as well, before suggesting a transition that would likely see the mild hybrids dropped first, leaving the PHEVs as transitional models in the lead-up to going full EV.

“That’s how I perceive the market going in Australia,” Connor said.

“The PHEV is a great step and I think you will see lots of people migrate to PHEVs and their next car will be an EV.”

VCA will launch the fully electric EX90 large SUV before the end of the year and follow it up with the as-yet-unsighted ES90 large luxury sedan in 2026.

The current portfolio comprises the battery-electric C40, EX30 and XC40 Recharge, mild hybrid S60, V60 Cross Country and XC40, while the XC60 and XC90 are sold both as mild and plug-in hybrids.

Connor committed the local operation to going all-electric in October 2022 in the wake of Volvo’s global commitment to being EV-only by 2030.

The brand’s global boss, Jim Rowan, announced last month however that mild and plug-in hybrids would remain in its line-up post-2030, citing “changing market conditions and customer demands”.

Connor was clear the global announcement reflected the issues impacting local subsidiary’s EV policy.

“The sentiment and strategy is still the right strategy; being fully electric is still the right thing to do but the target of being fully electric by a certain point is the challenging one,” he said.

“I’ve got to take the pragmatic view in the same way we [Volvo globally] are doing in the 2030 announcement.

“The pragmatic view has got to be based off consumer sentiment, it’s got to be based off product lifecycle and it’s also got to be based off profitability of us and our dealer network.”

That last point is key – carsales understands there was angst in the local Volvo dealer network about the early EV transition along with the significant investment required and declining sales.

Connor will get a better taste of the mood at a dealer conference in two weeks where an updated product plan will be presented.

VCA sales are down 20.9 per cent year-on-year to September with only the new EX30 electric compact SUV providing a bright spot.

“The dealers will be receptive to this, I think more importantly they will like we are listening to the market and consumers,” Connor said.

Volvo’s electric spin-off, Polestar, thinks itself another beneficiary of the move.

Back in October 2022, Connor nominated a target of 80 per cent EV sales for VCA locally by 2025 and an eventual target of 20,000 EV sales per year. So far in 2024 the brand has only sold 6974 vehicles.

The managing director wound back both targets today, estimating EVs would peak at 70 per cent of total says in 2025, with 15,000 sales still being the aspirational target within “three to five years”, potentially including MHEVs and PHEVs.

“Potentially, but not guaranteed,” he cautioned.

“Because the market is so volatile at the moment we work in every six months on the product strategy and what we need to do.”

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