This was inevitable.
Volvo Cars has jolted the car market, announcing that every new model it launches from 2019 will be electrified in some way. If anyone ever doubted, it’s clear now that we are witnessing a global shift to electrified vehicles (EV). The internal combustion engine (ICE) that’s dominated the industry for more
than 100 years isn’t dead. Not yet. But we can all now see its inevitable end.
Volvo’s move, however, should not come as a surprise to anyone who knows and understands the company and the broader marketplace in which the auto industry competes for customers – and government approval. By that I mean car companies around the world must deal with ever-tightening environmental regulations and they – and customers — are also chasing government subsidies and favours of all sorts.
But let’s start with Volvo, a Chinese company based in Europe and owned by Zhejiang Geely Holding Group Co., Ltd. Volvo is an upmarket European brand bought out of near-bankruptcy from Ford Motor seven years ago for the bargain-basement price of $1.8 billion (US).
Volvo, then, straddles the two largest new-car markets in the world (the U.S. is No. 3). And both China and Europe have fully embraced the electrification of the automobile.
Let’s start with China, which quite clearly aims to become the world leader in EVs – in terms of production, sales and technology. The Chinese government has embraced the electrification of the automobile. China as a whole believes that technology leadership in EVs is critical for car companies to thrive in the coming decades.
Government help is rich and broad and it’s working. The Chinese government offers electric vehicle manufacturers rich subsidies – up to 50-60 per cent of the retail price of a car. Buyers, meanwhile, are exempt from sales taxes on locally-made models.
As well, local governments offer their own incentives. Owners in some places are exempt from registration fees and EV drivers often have preferred access to cities. And the Chinese authorities have been busy rolling out recharging networks across the country.
Today, China is the world’s largest market for electric vehicles. Last year, EV sales hit 409,000 units, up 65 per cent from 2015, reports the China Association of Automobile Manufacturers (CAAM). Another 98,000 plug-in hybrids were also sold. Thus, sales of these so-called “new-energy” vehicle hit 507,000 units, for a 53 per cent year-on-year jump.
China has more EVs in use than any country or region. Yale Environment 360, a publication of the Yale School of Forestry and Environmental Studies, notes there are 600,000 all-electric vehicles on China’s roads. The plan is to get to 5.0 million EVs by 2010. Europe has about 500,000 EVs on its roads, with the U.S. at fewer than 500,000.
Ah, Europe. As The Guardian notes, European governments prefer the stick — legislation – over the carrot — subsidies — to electrify the automotive fleet.
Wolfgang Bernhart of the consulting firm Roland Berger told The Guardian that the European Union has set mandatory emissions-reduction targets that will lead to a 40 per cent average emissions reduction in all new cars sold by 2021. The only way to get there is to adopt EVs quickly and on a large scale.
Which is precisely what Volvo is doing. Volvo will launch five fully electric cars between 2019 and 2021, three of which will be Volvo models and two of which will be high performance electrified cars from Polestar. Sales of older pre-2019 gasoline vehicles could extend out to 2025. Volvo hopes to sell 1.0 million electric or hybrid cars globally by 2025.
Volvo and Tesla are the only major automakers to make a 100 per cent EV commitment. But long-term success in the auto industry depends on innovation and the next battleground will be electric vehicles.
Thus, the three leading German carmakers, Volkswagen, Daimler (parent of Mercedes-Benz) and BMW are particularly focused on Tesla, arguably the world leader in if not EVs, certainly in creating a drumbeat of interest and expectations in them. Add Volvo to this list, along with the Nissan-Renault Alliance.
Volkswagen, coming off the smear of the “Dieselgate” scandal, says it will “leapfrog Tesla in the electric car race. The goal is to sell more than 1.0 million battery driven vehicles by 2025.
Daimler is accelerating its $10 billion (US) investment in electric vehicles. The goal is to launch 10 new electric car models by the year 2022. BMW has similar plans, the most interesting piece of which is the all-electric 3-Series to be introduced this fall.
The 3-Series EV is aimed at the Tesla Model 3. Tesla CEO Elon Musk, through his Twitter account, says the first Model 3 will roll off the assembly line Friday, July 7 – wearing serial number 001. A “handover party” for the first 30 customers is planned for July 28. Musk suggests that it “looks like” Tesla could be producing as many as 20,000 Model 3s a month by the end of the year.
Other automakers, of course, are committed to EVs. General Motors has successfully launched the Chevrolet Bolt and more EVs are planned. Jaguar is now testing its all-electric iPace crossover wagon. Nissan is about to launch an all-new LEAF EV – the world’s best-selling EV by far. Toyota is now committed to a quick expansion of its EV lineup, as is Honda. And so on.
Volvo, though, has set the EV standard among established automakers with a long history. Given the nature of the Volvo brand, its parent company and where Volvo competes most aggressively, this was inevitable.
As is the steady push to a world in which EVs dominate.