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You can do a lot with a fairly stock 8V motor. Going from stock HP levels up to 225 or so at the wheels can be done pretty easily and cheaply. Mostly junkyard parts of various types. Ford browntop injectors. Old Isuzu cube van intercoolers. Later FWD Volvo turbos. IPD turbo cam.
However, the flow in the head is still limited. Even a heavily modified 8V head, with huge valves and $1500 in skilled porting, barely matches the flow of a bone stock 16V head. So the 16V opens up a new range of possibility.
In the end, though, you either spend a lot of dough and effort in putting together a 16VT motor with 300 - 400 hp, or you spend a lot of dough and effort (probably fairly similar amounts) in putting a nice SBF or SBC in the car, with similar HP levels. Only with the Volvo you have a fairly high stressed little bomb, and you're fairly well topped out in terms of future improvement. With the V8, you've got lots of room for future improvement. Sneeze hard on a 5.0 and it picks up HP. Performance parts are all over the place, and (relative to Volvo perf parts) pretty cheap. Of course, it takes the fun out of popping the hood and showing people there's still a Volvo 4 cylinder under the hood.
Mine still looks pretty stock outside. Just some 17" wheels and a plain steel 3" tailpipe sticking out of the back in the normal spot. Quiet mufflers on it too. Pretty stealthy.
Here's what it looked like when I bought it in Dec 2005:
Already had a little secret under the hood:
'93 940T B230FT engine and AW71 trans, so neatly installed you'd have been hard pressed to say it didn't come from the factory like that if you didn't know any better. Running about 12 psi, about the most you can do with stock everything (injectors, intercooler, cute little 13c turbo). If I had any sense I'd have left it like that. But after a little bit, you get used to 170 hp, and you want a little more.
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'63 PV544 rat rod, '93 Classic #1141 245 +t
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