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It might sound strange to be worried about it - but, quite suddenly my car seems to have a lot more "oomph" from out of nowhere. It started when I was getting on the on ramp a few months ago. It seemed like the car was able to produce significantly more power, and it now cuts the power quite suddenly at a certain point.

This is a completely stock 2006 Volvo s40 T5 (turbocharged) with a manual 6 speed.

Can someone explain why this happened and should I be concerned about it?

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I'd be very concerned. It sounds like the wastegate may possibly be stuck closed, preventing it from bleeding excess pressure, which would allow the car to overboost. Higher than normal boost will provide better performance, but is likely to do engine damage unless the car has been otherwise modified to accept the higher boost. Some cars have overboost protection that will do something (cut ignition, cut fuel, etc) when excessive intake pressure is present, so I suspect that's what yours is doing (I'm not familiar with Volvo turbo setups, but have worked with various other turbo cars, both street going and racing).

One of my friends had some snow get packed up into the wastegate controller on his Eclipse one snowy day... He reports that the car was incredibly fast merging on the expressway for about 2 seconds, at which point the engine internals became externals as it suffered catastrophic failure (including an oil fire)...

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