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
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’