Volvo dismisses software fears

Sino-Swedish OEM Volvo Cars has downplayed negative reports around the software offerings on its fast-selling B-segment EX30 and its upcoming EX90 launch, following media coverage that the former was leaving customers dissatisfied and the latter would be released without full functionality and could require recalls.

“We had some teething issues with the EX30 very early on in the launch of that product,” admits Volvo CEO Jim Rowan. “Those issues were sorted very quickly.

“Maybe some of that news is just trickling out, but that seems to be aged news now and those problems have been solved. After about three or four months on the market, that is now the third best-selling EV car in the whole of Europe,” he continues.

Nor is Rowan concerned about the software offering on the EX90 three-row e-SUV, which will deliver to its first customers later this quarter. “On the EX90, the whole point of a software-defined vehicle that has over-the-air capabilities to continually upgrade that software is the fact that we can do that,” the Volvo chief says.

“So we will release the EX90; it will have a fantastic set of features from the start. But obviously, we can… unlock more benefits [and] features as we give over-the-air updates and as our software teams develop new and different features for the car.

“I think that customers who invest in advanced technology products like EX90 understand this fully, and they reap the benefits over time,” Rowan continues. “We do not think this is going to be an impediment to sales growth in the EX90, and we do not see any major loss of pre-bookings or pre-orders as the result of updating the car with software as it gets further into its journey.”

Return to vendor

Analysts are concerned, though, about reports that initial EX90 customers may need to physically return vehicles to have the central computing unit replaced. And Rowan does not rule out that eventuality, conceding that if physical replacement is “something which we feel will add benefit to the customer, then we will obviously take the responsibility to do that”.

“We are going to be upgrading the EX90 all the way through the course of this journey. Some of that will be software. Some of that will be hardware. And the immediate launch of that car, which we will see in the next couple of weeks, we are going to be collecting data. We are going to be looking at the best ways in which to give the software updates over-the-air or, in some cases, it may be better if we take it back and do an update at the garage — in which case, obviously, those costs will be covered by Volvo Cars,” he adds.

First EX90s will come out of Volvo’s Charleston, SC facility, with production having already started and completed cars in “the process of finding their way to customers right now”, Rowan says. The ramp-up to full production there will be "at the back end of this year and early into next year”, with EX90s going from SC to both to the US and European markets.

Contract manufacturing of the Polestar 3 will also take place at Charleston. But Rowan says there is “sufficient capacity” to serve that commitment and still “satisfy the demand that we expect to see for [the EX90] globally”.

“We will also start production of that same vehicle towards the back end of this year, early next year, in our China facility as well. So that can serve China and Southeast Asia,” he continues.

The firm saw gross margins for the second quarter reach 22.8pc, while gross margins for its BEVs hit a new high of 20pc, compared to just 3pc at their nadir in the second quarter of last year. All-electric sales were 26pc of Volvo’s total volumes that rose by 15pc year-on-year — with hybrids contributing another 22pc of the mix.   

But revenues exclusive of contract manufacturing rose by just 3pc, a mismatch driven by what CFO Johan Ekdahl describes as “slightly negative sales mix and pricing… mainly driven by product mix”. “A lot of the growth is driven by the EX30, which is very healthy margins, but it is a lower-priced car, which means that it affects the year-over-year one-to-one relation between volume growth and revenue,” he explains.

That gap is expected to close somewhat, but not disappear entirely in the second half of the year. “We will see a more balancing of the relation between growth and revenue for the full year, but maybe not 1:1,” Ekdahl predicts.

And the firm remains positive on EX30 margins, which are currently “at the upper end” of its guided 15-20pc range, even if its lower sticker price is impacting revenue growth somewhat, mainly due to robust demand for the higher-spec versions. “People like this car. They also like, let us say, the upper spec of this car,” says Rowan.