Volvo Plans to Go Electric, to Abandon Conventional Car Engine by 2019

Volvo Plans to Go Electric, to Abandon Conventional Car Engine by 2019

CEO reiterates target of selling one million electric cars and hybrids by 2025

Will Other Car Makers Follow Volvo's Switch to Electric?

Volvo plans for all new models from 2019 to be either fully electric or hybrid, the company announced Wednesday. But will other car makers follow, and what does this mean for the industry?

By William Boston July 5, 2017 12:00 a.m. ET

For Volvo the internal combustion engine has run its course.

In the face of competition from upstarts like Tesla Inc., which begins production this week of its new mass-market Model 3 electric battery-powered family car, the Chinese-owned automotive group on Wednesday said all new Volvo models from 2019 would be either fully electric or a hybrid.

Volvo is the first major auto maker to abandon the technology that has powered the industry for more than a century. Hakan Samuelsson, president and chief executive of Volvo Cars, said in a statement that the move “marks the end of the solely combustion engine-powered car,” reiterating his target of selling one million electric cars and hybrids by 2025. “When we said it, we meant it. This is how we are going to do it.”

Volvo also said it would launch five new electric and hybrid vehicles between 2019 and 2021. Two of the new models would be built by Polestar, the performance-car unit that Volvo is spinning off as a “separately branded electrified global high performance car company.” Volvo Cars would build the other three models. No further details were available.

All major auto makers are preparing for a shift to electric vehicles, but the challenge for the industry is to get the timing right because of the industry’s typically long product cycles that involve years of research and development before a vehicle rolls off the assembly line.

Auto executives talk about an impending “tipping point” when the costs of some electric car models are expected to fall below the cost of the conventional version of the same vehicle type. When that happens, industry executives and analysts say momentum could shift quickly in favor of electric cars.

Industry analysts estimate that rising costs of developing combustion engines that meet ever-stricter emissions regulations could make some electric models more affordable as soon as 2025. With a starting price of around $35,000, the Tesla Model 3 that launches this week is only slightly more expensive than BMW AG’s 3-Series sedan with a gasoline or diesel engine.

Volvo’s decision to accelerate the move to go electric could help it in light of a potential stock listing. Volvo, a Swedish luxury car maker that was founded in 1927, was bought by Ford Motor Co. in 1999. Ford sold the company to Geely Holding Group, a Chinese investment company, in 2010.

Struggling when Geely acquired it, Volvo has achieved a significant turnaround and is building its first manufacturing plant in the U.S.

Geely’s wager is paying off. Volvo reported a 67% increase in net profit to 7.5 billion Swedish kronor ($880 million) in 2016 on revenue of 180.7 billion kronor, up 10% from the previous year. The Swedish company’s global sales grew 6% to 534,332 vehicles last year. That put it on track to achieving its sales target of 800,000 vehicles by 2020.

The U.S. was Volvo’s fastest-growing market last year, posting an 18% increase in sales to 82,726 vehicles, driven by the popular XC90 luxury sport-utility vehicle.

Volvo declined to comment on speculation about an initial public offering, saying a listing was an option.

European auto makers that have relied on diesel engines because of their fuel economy and low carbon dioxide emissions have seen their stock prices discounted as investors worry about the growing number of municipal authorities that threaten to ban diesel vehicles from driving in their cities.

By contrast, Tesla, which only makes electric cars, sold around 84,000 cars last year, but its market value has surpassed those of Ford, General Motors Corp and BMW, which sell millions of cars each year.

Write to William Boston at william.boston@wsj.com

Appeared in the July 5, 2017, print edition as 'Volvo Sets Plan to Go All Electric Or Hybrid.'


Comments

Popular posts from this blog

How Facebook Outs Sex Workers

Time: The 15 Most Influential Websites of All Time

The Silicon Valley Backlash is Heating Up