Will A Volvo EV Drive Volvo Stock Upward?

Key Takeaways

• Volvo is shifting to an all-electric lineup by 2030.
• The new EX90 is the company’s flagship SUV, available in the Fall of 2023.
• Volvo has struggled recently with higher costs and sourcing of semiconductors.

For decades, Volvo has been a brand known for safety. Now, the Swedish car manufacturer wants to be known as an all-electric vehicle company too.

Volvo has faced obstacles like the semiconductor shortage and price increases, but all car manufacturers have encountered these issues. Here is what the future holds for Volvo, including the EX90.

Volvo committed to all electric

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

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

Since then, other car manufacturers have followed suit.

Most models made by Volvo currently come in multiple powertrains, either a gas-powered engine or a plug-in hybrid engine. The addition of the electric motor improves the fuel economy of the internal combustion engine by 15%.

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

The all new Volvo EX90

The new Volvo EX90 reaches showroom floors in the Fall of 2023 as a 2024 model. It’s a fully-electric, full-sized SUV that seats seven passengers.

This vehicle will offer an entry-level Twin Motor version with 402 horsepower and a Performance version generating 496 horsepower. Both engines are paired with all-wheel drive and have a driving range of about 300 miles per charge.

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

The Twin Motor version of the EX90 is expected to do zero to 60 in 5.7 seconds, while the Twin Motor Performance can do the same in 4.7 seconds.

The interior of the EX90 is expected to look clean, with a digital instrument cluster for the driver and a portrait-oriented touchscreen infotainment system in the center. Buttons and toggle switches are few and far between for both drivers and passengers.

Additionally, the materials used to make the interior of the EX90 are all recyclable.

Volvo’s financials

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

During the third quarter of 2022, the company’s retail sales decreased by 8% to 137,700 units compared to the same quarter one year ago. For the first nine months of 2022, sales units are down 19% compared to 2021.

Even with the decline in sales, net revenue increased 30% to SEK 79.3 million compared to SEK 60.8 million year-over-year.

Net income was down 71% compared to a year ago, coming in at SEK 0.7 million. Its gross margins also declined, from 22.7% in the third quarter of 2021 to 17.3% in the current quarter. This is a 24% decrease.

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

Volvo sales broken down by region shows that the car manufacturer is growing in China, with an increase of 27% in retail sales for the third quarter of 2022 year-over-year. However, all other markets have seen a decline in sales.

One 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 car for one monthly payment with maintenance and insurance covered. In the past year, subscriptions increased by 67%.

The future for Volvo

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

Shifting to electric vehicles and hybrids as the only options could help Volvo appeal to a broader audience. It may also position the company as a solid competitor against Tesla and other EV manufacturers.

The company is still on pace to meet its mid-decade goals of 1.2 million units sold, with 50% being fully electric vehicles, a 40% reduction in carbon dioxide emissions, and 50% of its units sold online.

However, Volvo faces headwinds in reaching these goals. The biggest hurdle is the short supply of the components needed to build vehicles. If Volvo can sort through this issue, they have a solid chance of reaching their goals and seeing their stock price increase.

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Bottom Line

It’s still early days for the EV industry, 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 it in an excellent position to attract new customers.

The company has been at the forefront of cutting-edge innovation once before and might be able to repeat its performance in safety, here. Drawing in new buyers for its products will result in increased brand loyalty and ensure the longevity of the automaker, potentially driving the stock upward.

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