The Daily Telegraph - Business

‘End of road for fuel’ as Volvo goes all-elec­tric

News of five-ve­hi­cle range sig­nals be­gin­ning of the end for combustion engine, says car gi­ant

- By Alan Tovey In­dus­try Ed­I­tor Business · Clean Tech · Ecology · Cars · Consumer Goods · Transportation · Electric Cars · Industries · Volvo Cars · Håkan Samuelsson · Beijing · Geely Automobile · Polestar Racing · Ford Motor Company · George Orwell · Zanzibar · United States of America · BIND · Nikola Tesla · Elon Musk · General Motors Corporation · BMW · Japan · United Kingdom · Morgan Stanley · Stanley · London · Goldman Sachs Group · Halfway · Orwell, OH · John Brunner · Tesla Motors · London Metal Exchange · Cobalt

VOLVO will be­come the first ma­jor car man­u­fac­turer to go all-elec­tric, with the Swedish com­pany say­ing that ev­ery new car in its range will have an elec­tric power train avail­able from 2019.

The com­pany said the an­nounce­ment marks “the his­toric end” of cars solely pow­ered by petrol or diesel and “places elec­tri­fi­ca­tion at the core of its fu­ture busi­ness”.

“This is about the cus­tomer,” said Håkan Sa­muels­son, chief ex­ec­u­tive. “Peo­ple in­creas­ingly de­mand elec­tri­fied cars and we want to re­spond to our cus­tomers’ cur­rent and fu­ture needs.”

Volvo, which is owned by China’s Geely, will launch five fully elec­tric cars across its range be­tween 2019 and 2021.

Two will be in the com­pany’s Polestar high per­for­mance sub-brand, which is be­ing re­vived.

The rest of the com­pany’s range will be avail­able with “plug-in hy­brid” power trains and 48-volt “mild hy­brid” sys­tems, which give an ex­tra “kick” to the ac­cel­er­a­tion of nor­mally pow­ered cars as well as op­er­at­ing as a sole power sys­tem. This means that cus­tomers will be able to spec­ify an en­vi­ron­men­tally friendly op­tion on all Volvo cars.

“This an­nounce­ment marks the end of the solely combustion engine-pow­ered car,” said Mr Sa­muels­son. “We have said we plan to have sold a to­tal of 1m elec­tri­fied cars by 2025. When we said it we meant it. This is how we are go­ing to do it.”

He re­fused to be drawn on when Volvo will sell its last petrol or diesel pow­ered ve­hi­cles, ad­mit­ting only that the de­vel­op­ment of elec­tric cars “has come faster than we thought it would a cou­ple of years ago”. The land­mark an­nounce­ment sends a sig­nal to the mar­ket and mo­torists that Volvo is em­brac­ing the elec­tric rev­o­lu­tion that is set to turn the au­to­mo­tive in­dus­try up­side down.

“Cus­tomer de­mand was be­hind this but it also tells in­vestors in in­fra­struc­ture such as charg­ing points and bat­tery tech­nol­ogy that we believe elec­tric is the fu­ture and they can count on Volvo to back them,” Mr Sa­muels­son added.

Costs of de­vel­op­ing the new cars and power trains will be in­cluded in the com­pany’s cur­rent re­search and de­vel­op­ment plans, which run at be­tween 5pc and 6pc of turnover – about £850m a year.

There has been grow­ing spec­u­la­tion that Volvo is prepar­ing for a flota­tion, hav­ing late last year raised £500m with Swedish in­sti­tu­tional in­vestors, with two huge pen­sion funds tak­ing pref­er­ence shares that can con­vert to or­di­nary stock. Al­though the stakes di­luted the 100pc hold­ing of Geely, the com­pany de­scribed the im­pact as “im­ma­te­rial”.

How­ever, Mr Sa­muels­son said the lat­est news about the growth of elec­tric sys­tems had “no re­la­tion or con­nec­tion to an ini­tial public of­fer­ing”.

His­tor­i­cally, Volvo has been at the fore­front of new au­to­mo­tive tech­nol­ogy in its 90-year life, with in­no­va­tions such as the first three-point seat belts and other safety sys­tems.

In re­cent years, it has fo­cused on self­driv­ing, and has stated that its vi­sion for 2020 is that with its en­hanced safety sys­tems no per­son will be killed by a new Volvo.

Geely bought Volvo in 2010 for $1.8bn (£1.4bn) from Ford, un­der whose own- er­ship sales fell and in­curred losses. The Chi­nese owner poured in­vest­ment into new mod­els, tech­nol­ogy and fa­cil­i­ties.

Un­der Geely’s own­er­ship, Volvo has en­joyed a resur­gence and in its last an­nual re­sults posted sales 6.2pc higher to a record 534,000, driv­ing rev­enues 10pc up to SEK 180bn (£16.2bn) and op­er­at­ing prof­its up 66pc to £990m.

Many a science fic­tion novel of the post-war pe­riod has been used to point out the, at times, ab­surd, even dystopian, na­ture of mod­ern life. Ge­orge Or­well’s 1984 is the ex­em­plar of the trend. Newspeak? Tick. Te­le­screens? Half­way there. The end­less war? Pretty much. But while Or­well’s vi­sion is of­ten used as an ex­am­ple of how past fic­tion im­i­tates cur­rent re­al­ity, one pos­si­bly even more pre­scient tome is of­ten over­looked. John Brun­ner’s Stand on

Zanz­ibar looks at over­pop­u­la­tion. It is a dark take on the fu­ture, ex­am­in­ing the so­cial and eco­nomic im­pact of a fast-grow­ing world as peo­ple strug­gle to cope with new tech­nolo­gies. It was first pub­lished in 1968 but set in 2010.

While Brun­ner got many things wrong, he got many oth­ers right. He pre­dicted young peo­ple would spurn re­la­tion­ships for no-com­mit­ment trysts, that the US would be hit be a se­ries of school shoot­ings, and al­most ac­cu­rately pre­dicted that the global pop­u­la­tion would hit 7bn. He even named a fu­ture US pres­i­dent as Pres­i­dent Obomi.

Per­haps one of his more in­ter­est­ing and rel­e­vant fore­casts was that all cars would be elec­tric. To sug­gest such a thing in the US of the late Six­ties, when the post-war de­mand for cars was cou­pled with rapid road con­struc­tion, was un­think­able. Gas, as petrol is known in the US, was the key fuel on which the in­dus­try was pow­ered, and to sug­gest oth­er­wise was on the verge of lu­nacy. But, al­though Brun­ner was per­haps a lit­tle early on tim­ing, his no­tion that cars would be elec­tric-pow­ered was spot on.

That no­tion moved a step closer yes­ter­day when Volvo said that it would of­fer elec­tric ver­sions of all of its mod­els by 2019.

Al­though it stopped short of sound­ing the death knell for petrol and diesel mod­els, the com­mit­ment is sig­nif­i­cant. With it, Volvo has be­come the first ma­jor car man­u­fac­turer to say it will go fully elec­tric – that is of­fer­ing cus­tomers the abil­ity to buy an elec­tric version across its full range. It also said that from now on, new mod­els will be elec­tric-only.

Clearly, this comes on the back of an ar­ray of slightly lesser elec­tric pledges from other ma­jor mar­ques. It also fol­lows the con­tin­ued hype around Tesla, Elon Musk’s elec­tric ve­hi­cle maker, whose mar­ket cap­i­tal­i­sa­tion has sur­passed that of tra­di­tional ri­vals such as Ford, Gen­eral Mo­tors and BMW, de­spite hav­ing de­liv­ered only a frac­tion of the cars. But for Volvo to come out with such a public af­fir­ma­tion – and quite so quickly – moves things up a gear.

The ques­tion then is not whether elec­tric cars will take off. With such in­vest­ment from across the in­dus­try, their adop­tion by con­sumers – who have a his­tory of do­ing what they’re told in this field – is all but in­evitable. But what is not in­evitable is whether the ecosys­tem that sur­rounds the au­to­mo­tive in­dus­try is ready for the stark changes com­ing down the tracks.

In the same way that the rise of the tra­di­tional mo­tor car re­quired in­vest­ment in petrol sta­tions, so the elec­tric car will need to be charged. In­no­va­tions in bat­tery tech­nol­ogy mean range will in­crease, but reg­u­lar charg­ing will re­main a ne­ces­sity. Own­ers will be able to do this at home eas­ily. But there will also need to be in­vest­ment in a net­work of re­mote charg­ing sta­tions, a nov­elty in most towns. Some coun­tries are ahead on this – in Ja­pan, as of April 2016, there were more charg­ing sta­tions than fill­ing sta­tions.

In the UK, data from in­dus­try spe­cial­ist Zap Map found that, as of March this year, there were 6,535 charg­ing sta­tions com­pared to 8,450 petrol sta­tions – but what that data doesn’t re­veal is how many points were at each sta­tion, com­pared to the num­ber of pumps per fore­court.

But it is not just charg­ing points that are needed. A re­cent re­port by in­vest­ment bank Mor­gan Stan­ley found that a typ­i­cal elec­tric car re­quires the same amount of power as the av­er­age Bri­tish home over the course of a year. As such, power com­pa­nies will need to en­sure that they can cope with in­creased de­mand.

A third con­cern comes from the costs in­volved as a re­sult of this ma­jor change. Cobalt, graphite and lithium are three key com­modi­ties used in the bat­ter­ies. Ac­cord­ing to the Lon­don Metal Ex­change, the price of cobalt has in­creased from a price of $32,000 per ton at the start of this year to just shy of $60,000 to­day. A near dou­bling in six months. The prices of graphite and lithium have also been boosted by the ac­cel­er­a­tion in de­mand each is ex­pe­ri­enc­ing from the mo­tor in­dus­try. Clearly, as more and more elec­tric cars are pro­duced, the economies of scale will mean costs will come down, but keep­ing a lid on raw ma­te­rial prices will be vi­tal.

These are just three is­sues that those in­volved in the push to elec­tri­fi­ca­tion must grap­ple with – there are many more, rang­ing from en­vi­ron­men­tal con­cerns of in­creased elec­tric­ity gen­er­a­tion to per­for­mance is­sues – if the elec­tric rev­o­lu­tion is to ac­tu­ally come off.

Of course, while all the noise was around yes­ter­day it was lit­tle no­ticed that an­a­lysts at Gold­man Sachs re­duced their tar­get share price fore­cast on Tesla from $190 a share to $180. Musk’s cor­po­rate baby may have seen its shares slip from highs above $383 in late June – fall­ing around 13pc since then – but they re­main around the $330 mark, a clear sign that, de­spite the con­cerns, the elec­tric fu­ture, as Brun­ner pre­dicted 49 years ago, is here to stay.

‘Volvo moves things up a gear by say­ing it will go elec­tric across its whole range’

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