Will a Volvo EV push Volvo stock higher?

The central theses

  • Volvo will transition to an all-electric offering by 2030.
  • The new EX90 is the company’s flagship SUV and will be available from autumn 2023.
  • Volvo has been struggling with higher costs and semiconductor sourcing lately.

Volvo has been a brand known for safety for decades. Now the Swedish automaker also wants to be known as a maker of pure electric vehicles.

Volvo faces obstacles like semiconductor shortages and price hikes, but all automakers have encountered these problems. Here’s what the future holds for Volvo, including the EX90.

Volvo is fully electric

Volvo has decided to switch its automobile production to an all-electric or hybrid powertrain for each of its models. The automaker, once known for its cutting-edge safety features and crash ratings, aims to lead the automotive industry in terms of innovation.

The company announced this decision in 2019 and aims to have at least 50% of its production fully electric by 2025, with hybrid vehicles making up the remaining volume. Volvo has also pledged to put one million electric vehicles on the road by 2025.

Since then, other automakers have followed suit.

Most models manufactured by Volvo are currently available with multiple powertrains, either a gas-powered engine or a plug-in hybrid engine. The addition of the electric motor improves the fuel consumption of the internal combustion engine by 15%.

Volvo also offers two fully electric plug-in models, including the C40 Recharge and XC40 Recharge.

The all-new Volvo EX90

The new Volvo EX90 will hit showrooms in autumn 2023 as a 2024 model. It’s a full-size, all-electric SUV that seats seven passengers.

This vehicle will offer an entry level twin engine version with 402 hp and a performance version with 496 hp. Both engines are paired to all-wheel drive and have a range of about 300 miles per charge.

No manufacturer’s suggested retail price has been announced, but buyers should expect it to cost more than the comparable XC90. Prices of this model start at $56,000 for the gas-powered version and $71,900 for the hybrid.

The Twin Motor version of the EX90 is said to go from zero to 60 in 5.7 seconds, while the Twin Motor Performance does the same in 4.7 seconds.

The EX90’s interior is said to look clean, with a digital instrument cluster for the driver and a portrait-style touchscreen infotainment system in the middle. Buttons and toggle switches are few and far between for both driver and passengers.

In addition, all materials used for the interior of the EX90 are recyclable.

Volvo’s finances

The Volvo Group reported mixed results for the third quarter of 2022. As Volvo is a Swedish company, it reports its financials in Swedish Krona (SEK).

In the third quarter of 2022, the company’s retail sales declined 8% to 137,700 units compared to the same quarter last year. In the first nine months of 2022, sales units are down 19% compared to 2021.

Despite the decline in sales, net sales increased by 30% to SEK 79.3 million compared to SEK 60.8 million year-on-year.

Net profit decreased by 71% compared to last year and amounted to SEK 0.7 million. Gross margins also declined from 22.7% in the third quarter of 2021 to 17.3% in the current quarter. That’s a 24% drop.

The decline in net income and profit margins was due to higher raw material costs, logistics costs and the need to purchase automotive semiconductors.

Volvo sales by region show the automaker is growing in China, with retail sales up 27% year-on-year in the third quarter of 2022. However, all other markets recorded a decline in sales.

A significant area of ​​growth for Volvo is its subscription service. This service is a flexible alternative to buying or leasing a vehicle. You can use any Volvo vehicle for one monthly payment with maintenance and insurance covered. Over the past year, subscriptions have increased by 67%.

The future for Volvo

Volvo has transformed itself from a somewhat mundane import brand whose value lies in its safety features to a high-end niche brand. Until recently, the company offered a limited number of models, limiting its target audience and repairability.

Switching to electric vehicles and hybrids as the only options could help Volvo appeal to a wider audience. It could also position the company as a solid contender against Tesla and other EV manufacturers.

The company is still on track to meet its mid-decade goals of 1.2 million units sold, with 50% being fully electric vehicles, cutting carbon emissions by 40%, and selling 50% of its units online.

However, Volvo faces headwinds in achieving these goals. The biggest hurdle is the scarcity of components needed to build vehicles. If Volvo can solve this problem, they have a solid chance of hitting their goals and seeing their stock price rise.

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bottom line

The EV industry is still in its infancy, and the sun has yet to set on the internal combustion engine. In the short term, Volvo’s commitment to electric and hybrid engines puts the company in an excellent position to attract new customers.

The company has been at the forefront of cutting-edge innovation before, and it may repeat its security feat here. Attracting new buyers to its products will lead to increased brand loyalty and ensure the automaker’s longevity, potentially driving the stock higher.

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