Volvo vs. Tesla

This past weekend I rode along while my son test-drove a brand new Volvo XC 90, a big SUV that bore a sticker price of more than $61,000.

VolvoMy son doesn’t want to buy a car; he doesn’t even want to own a car. But he had received an offer in the mail from Volvo promising $75 just for taking a test drive, and that was an offer he couldn’t refuse.

The car was very comfortable, even cushy. But all that cushiness couldn’t hide two things—the noise of the engine and the feel of the mechanical shifting of the transmission, two things that don’t even exist in my Tesla.

But Volvo isn’t going to stick with these gasoline-burners much longer. In fact, on July 5, Volvo announced that as of 2019, all its new car models launched would be either hybrid or fully electric cars. Unfortunately, many, many news outlets (including The Wall Street Journal) misinterpreted this to mean that Volvo will stop making traditional gasoline-powered cars at the same time. Not true. Volvo will continuing making and selling existing gasoline-powered models, and the market—among other factors—will determine when the actual end of the line comes for those traditional vehicles.

In any case, the market that Volvo is truly targeting with this new direction is not the U.S. but China, which is not only the world’s largest market for cars but also the home of Volvo’s parent company, Zhejiang Geely Holding Group (which bought Volvo from Ford in 2010).

Spurred by a need to reduce pollution, China is requiring automakers’ fleets to reach the equivalent of 47 mpg by 2020, and the only way for Volvo to do that (absent making little cars), is to go hybrid or electric.

The hybrid/electric power plants will also provide a great alternative to diesel in Europe. Volvo sales in Europe were 83% diesel in 2016, but thanks mainly to Volkswagen, manufacturers (and consumers) are now running from diesel as fast as possible.

But this doesn’t mean Volvo’s new offerings will be competitive with Tesla’s all-electric cars. The vast majority of Volvo’s cars will be built on existing (un-optimized) platforms and will be mild hybrids, in which electric systems assist a gasoline engine at times and store energy regenerated in deceleration, but are unable to propel the car on electricity alone.

Tesla, meanwhile, continues to lead the pack in the electric car market, with its “affordable” Model 3 beginning deliveries to the first of more than 400,000 reservation-holders later this month.

Tesla Model 3Conclusion, Volvo is moving in the right direction, but as of today has nothing that is competitive with Tesla’s all-electric vehicles.

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