Volvo has admitted that its EV business is unable to scale production enough to introduce price cuts to match those made by Tesla. Volvo’s biggest problem is glaring, the company managed to sell just 66,000 EVs in 2022 compared to Tesla’s 1.3M volume sales. Tesla has scale to introduce cost cuts, furthermore, Tesla’s manufacturing cadence is significantly more efficient than Volvo’s which allows Tesla to introduce multiple levels of price reductions end-to-end.
For example, in the USA Tesla recently reduced the price of an AWD Model Y to $39,000 (after rebates), that’s cheaper than an AWD Toyota RAV4 PHEV. Tesla will still make a significant profit and can lower the price even further if they so wanted. Volvo simply doesn’t have the scale to match Tesla, it has the ambition but for now, it is moving like an oil tanker compared to Tesla’s powerboat.
Nevertheless, in the first quarter earnings report, Volvo drummed the beat for success citing healthy demand for its current range of petrol mild hybrids, PHEVs and fully electric cars. Volvo shipped and sold over 615K units in 2022. In the short to medium term, Volvo sees no reason to introduce price reductions to its range of EVs.
The earnings report is a tacit admission that Volo is unable to compete with Tesla. The Swedish/Chinese company is one of many car manufacturers that was hit by tight supply chain demand issues exacerbated by the pandemic. But as the supply chain untangles Volvo has nowhere to hide. Nevertheless, Volvo will go fully electric by 2030.