Volvo Brews a Big Pitcher of Electric Kool-Aid

Volvo’s move might seem a head-scratcher, until you gaze eastward to China. Volvo is owned by Chinese automaker Geely, in a country that’s Volvo’s largest market, one that’s also primed for mass adoption of electrified cars.

As ever, several media outlets got the Volvo story ass-backwards, in their clickbait-driven urge to prematurely bury the internal combustion engine. But hold your horses, because Volvo will still need gasoline to provide those horses for years to come.

Here’s what the company actually said: Every all-new Volvo model, released in 2019 and beyond, will be partially or fully electrified, as a hybrid or full battery EV. Hearing the word “electrified,” media gun-jumpers hailed Volvo as the first automaker to phase out cars powered exclusively by an internal combustion engine. 

That's not what actually happened. To be fair, Volvo CEO Hakan Samuelsson muddied the green waters with his own words:

"This announcement marks the end of the solely combustion engine-powered car," Sameulsson said. "Volvo Cars...plans to have sold a total of 1 million electrified cars by 2025. When we said it we meant it. This is how we are going to do it."

Samuelsson’s one word, “solely,” in fact affirmed Volvo’s continued reliance on the IC engine. Even if Volvo achieves its lofty goal of 1 million sales, the vast preponderance of those cars will be plug-in hybrids. Those hybrids will all have IC engines, with a supplementary boost from electric motors and batteries.

Now, we’ve heard these kind of promises before, from Chevrolet’s claim that it would sell 1 million hydrogen fuel cell cars (actual number: zero) to President Obama’s pledge to have 1 million plug-in cars on the road by 2015 (actual number, 400,000). The first of several planned Volvo EV's won't get here until 2019, even as Tesla, Chevrolet, Ford, Nissan and others are cranking out EV's by the thousands. So let’s take a breath, ideally free of pollutants, before anyone declares Volvo a leader in the electric race.

Volvo spokesman Russell Datz further confirmed that models created before 2019 – meaning Volvo’s entire current lineup, along with 2018 models – will continue to be sold in conventional, all-fossil-fuel form. If an all-new, 2018 Volvo XC60 has a life cycle of seven years, that means you’ll still be able to buy a new, 100-percent-IC Volvo until 2025, unless market demand convinces Volvo to phase them out earlier. Here’s the more likely scenario: Volvo will end up granting all-IC models a reprieve in markets that stubbornly refuse to switch. 

In the short term, Volvo’s electric switcheroo seems to make sense for China, where Volvo continues to ramp up production. That nation may seize huge competitive advantage by rapidly switching its economy to clean, renewable energy while America dithers and plays with obsolete lumps of coal. If China’s dissent-crushing government decrees that wind, solar power and electric cars are the way to go, it might make that switch at the same breathtaking speed at which it creates new cities and highways, seemingly from thin air.

America and Europe are a different matter. Those markets remain critical to both Volvo’s sales and its image as a genuine luxury rival to the likes of Mercedes and BMW. American EV sales grew 37 percent in 2016, but that still meant a paltry 159,000 vehicles, or fewer than 1 in every 100 new cars. Europe likes electric cars and hybrids even less than we do, though Renault's new Zoe city car has sparked a sales jump in 2017.

Volvo prefers more-hopeful projections, the idea that electrified cars will reach a tipping point with consumers. Last year brought a new record for plug-in hybrid and EV’s, with 750,000 sales around the globe, and a suddenly booming infrastructure of two million public charging stations. Datz cites International Energy Agency projections that show as many as 20 million electrified cars on the road by 2020, an explosive rise from 2 million today.

“Five years ago, there were almost none,” Datz says of those alternative-fuel models. “Between market demand and regulation, electrification is the way of the future.”

Volvo is not alone in moving toward an electrified lineup, with everyone from Ford to Ferrari harnessing electricity to boost performance and fuel economy while trimming emissions. Volvo has already adopted an exclusively four-cylinder lineup, another brave move for a luxury automaker. In that light, Volvo’s electrification seems almost a matter of necessity: If you’re the type of Volvo buyer who demands more grunt from a four-banger, hybrid power becomes a smart way to get there. Volvo’s T8 version of the XC90 SUV makes a burly 400 horses from a sophisticated plug-in hybrid system with two electric motors and a 2.0-liter four with a turbocharger and supercharger. Later this year, the 2018 S90 sedan and XC60 SUV will adopt that “Twin Engine” hybrid system as an option.

Yet Volvo had better hurry up with more efficient and affordable hybrid technology, if it hopes to make a viable business from an electrified lineup. Volvo’s XC90 T8 hybrid starts from about $68,000, versus about $46,000 for a gas-only XC90. The EPA credits the XC90 T8 with 53 mpge in all-electric mode, and 25 mpg in hybrid operation, but I saw just 21 mpg during my test drive; hardly a reason to kick in such a massive price premium for a hybrid SUV. For all its reputation for safety, and plaudits for its newly stylish designs, Volvo still struggles to sell cars in that upper strata of luxury. Though its sales are rising, Volvo moved just 83,000 cars in America last year; Mercedes sold 340,000, and BMW and Lexus both topped 300,000.

Secondly, luxury hybrids have been a marketplace disaster so far, with not a single hit model after a decade of attempts, and several outright sales duds, including the Lexus LS 600h. If Lexus can’t sell hybrids to green-minded customers, as the luxury arm of the hybrid king Toyota, why should Volvo fare better? And even if Volvo succeeds in putting deep-pocketed Americans in a hybrid or EV, can the company turn a reasonable profit on electron-enhanced cars? 

Volvo clearly understands current realities, and is placing a confident bet on the future. Datz called that move consistent with Volvo’s longtime philosophy.

“We’re looking for what’s next,” Datz says. “For a company that’s been very much about people and the environment, we feel this is the right way to go.”

I’d agree that Volvo’s heart is in the right place.  But are Volvo showrooms the wrong place for a purely electrified lineup? I’d argue that they are, with Americans wallowing in cheap gasoline, and Volvo’s current electric technology being prohibitively priced and offering nominal gains in fuel economy. A prediction: Volvo will reverse course and extend the life of all-IC models in America, perhaps even beyond 2025. But this time, they’ll skip the big announcement.