Volvo makes some of the most inefficient vehicles on the planet. Their gas-guzzling line of vehicles barely eke out 25 miles to the gallon on the highway, according to Consumer Reports and the company’s own statistics. Their cars are built like tanks, which isn’t too surprising when you realize the company manufactures millions of busses and trucks. Volvo’s vehicles are fun to drive, but slightly more terrible for the environment than your average car.
Despite their terrible fuel economy, customers around the world still buy millions of Volvos. At the same time, many car shoppers are also turning to hybrid or electric vehicles. New car buyers want to minimize their carbon footprint and buy something that’s decidedly cooler than a gas-powered vehicle.
Volvo, a major player in the gas-powered game, knows what the current trends are, as do their competitors. Yet unlike most other car manufacturers, Volvo wants to change their current approach and market to these conscious customers. To accomplish this, they plan on becoming the first traditional car company to sell electric cars — and electric cars only.
Volvo is going all-in on electric cars…kinda.
Starting in 2019, Volvo will only sell electric or hybrid-powered vehicles. The company will quickly phase out their gas-only lineups and introduce new models that either rely partially or entirely on electric power. Whether the company plans on making traditional hybrids or plug-in models remains to be seen, though Volvo already sells a plug-in XC90 SUV. Making more models plug-ins won’t be as difficult due to the company’s existing infrastructure.
Volvo plans on selling 1 million electric vehicles by 2025.
Based on this prediction and the sheer amount of vehicles sold by Volvo, the company plans to rely heavily on their upcoming hybrid fleet. The Chinese-owned automaker will slowly introduce electric-only vehicles later this decade, though these cars won’t make up the bulk of their sales. If the company were to reach this 1 million milestone, it could mean a shift between hybrids and electrics in the years to come.
Volvo shareholders are pleased about the company’s direction.
Volvo’s stock is up 2.27% in the two trading days since the company’s announcement. This proves that investors are positive on the idea of the electric/hybrid transition, as it could make the company more competitive and bring in more revenue/profit. Volvo will eventually have to deliver on their announced benchmarks, and doing so would see a further increase in share price. Missing deadlines, delaying production, or deviating from their big new plan would have a negative effect on their stock.
Should you invest in Volvo?
Volvo’s stocks ($VOLV-B and $VOLV-A) trade on the Nasdaq Nordic, a Sweden-based stock exchange. This exchange works similarly to the traditional American Nasdaq, except all companies are priced in Swedish krona (among a few other differences). Nonetheless, both stocks outpaced the S&P 500 since the start of the year, in the last year, and in the last five years.
If you believe Volvo’s big bet on electric and hybrid vehicles will lead to higher revenues, profits, and stock growth, you might consider investing in them. Just be sure to do your research on the company’s financials and future plans before you spend a dime.
If you think the transition to electric and hybrid vehicles will hurt Volvo’s bottom line or prove to be unpopular, simply invest elsewhere. Perhaps you might consider investing in the burgeoning self-driving car space instead.