Volvo Car Group announced yesterday that in a few years, every model rolling off the automakers’ assembly line will at a minimum be partly powered by electric battery system. The Sweden-based luxury car manufacturer, owned by China’s Zhejiang Geely Holding Group, said it would roll out five new all electric-cars between 2019 and 2021. The company will also offer plug-in hybrid vehicle (PHEV) and mild hybrid choices to its customers. Two of the new all-electric models will be branded as Polestar, a new line of electric cars the Swedish automaker has recently spun off.
In recent years, the company has been polishing its sustainability credentials; in December 2015, Volvo said it had rescinded its membership in a major mining trade organization after that group continued to lobby against the Environmental Protection Agency’s Clean Power Plan. Less than two months ago, Volvo mentioned that the company would slowly stop manufacturing diesel-powered cars.
“This is a clear commitment towards reducing our carbon footprint as well as contributing to a better air quality in our cities,” said Volvo’s President and CEO Håkan Samuelsson in a video explaining the strategy. “We are convinced that the future of Volvo is electric, and that’s why we’ve stated the bold commitment.”
Volvo’s phasing out of cars with pure internal combustion engine (ICE) will drive the company’s publicly stated goal of selling 1 million electrified cars by 2025.
Since Geely acquired Volvo from Ford in 2010, the company has accelerated investment in new automobile models and assembly plants in an attempt to compete with other luxury car brands such as BMW and Mercedes-Benz. This shift is a huge risk for Volvo, as most buyers of luxury cars (true of most automobile purchasers in general) make such purchasing decisions based on design and performance.
But the upstart high-end automaker Tesla has proven that electric vehicles can develop fierce customer loyalty and a devoted fan following. Furthermore, as these cars’ ranges improve and additional drivers experience the impressive torque with the quiet ride typical of electric vehicles – without the annoying maintenance schedule or need to fill up the tank at a gas station - more consumers will gravitate to these vehicles.
To that end, Volvo is bullish on the future of electric cars, and will be seen as a trendsetter by the global automotive press, which currently focuses most of its electric car discussions on Tesla. And investors are starting to line up behind Volvo’s vision, as Reuters has pointed out that in recent months the company has raised almost $600 million from Swedish institutional investors alone.
Fans of electric cars are quick to tout the world’s environment as the big winner. That may be true, but for many workers within the automotive sector who fear that automation will eliminate their jobs, another other huge beneficiary of this announcement is the global supply chain. Bloomberg’s Chris Bryant highlighted the fact that cars that are powered by both fossil fuels and electric motors require more parts and more technology. The result is several years of robust business for suppliers and technology companies.
But as is the case with the boom-and-bust cycles that have long sidetracked automakers, any boost in hybrid sales could fizzle by early next decade. Sure, hybrid cars are a viable option for consumers who still succumb to “range anxiety,” and see such cars as a way to prove their sustainability chops. But a report the investment bank UBS published earlier this year suggests that electric cars could reach cost parity with gasoline-powered peers as early as next year.
Volvo’s attempt to differentiate itself from its competitors may not last long. BMW, for example, is expected to release its updated all-electric i3 this fall. And if Tesla meets expectations with the much-anticipated roll out of its Model 3, watch for the other automakers to scramble as more drivers grasp the benefits of driving an all-electric vehicle.
Image credit: Volvo