Electric Vehicles

Taking Aim At Germany's Luxury Carmakers

A Volvo electric car customer of the future? Picture source: Reuters

Swedish automaker Volvo has an image of making dull but extremely safe passenger cars. They were a hit with affluent suburban families, especially those boxy station wagons with built-in baby seats, but they never sold enough cars to make the company viable.

But now Volvo is hoping it will steal key market share from German luxury car brands, which are currently struggling with a diesel emissions scandal, by its bold decision to become a primarily electric car company by 2019.

“We must be in the same league as BMW, Mercedes and Audi,” said Håkan Samuelsson, Volvo’s CEO, during an interview with Handelsblatt at the company’s headquarters in the Swedish city of Gothenburg. “It would be a mistake to copy their strategy. We must go our own way.”

“We must prepare our stakeholders for the arrival of electric cars”

Håkan Samuelsson, CEO, Volvo

Volvo announced in June that beginning with the 2019 model year, it will produce only electric cars and hybrid electric-gasoline vehicles. They will include one model with a gasoline engine, but which also generates electricity from the brakes to power a small electric motor.

Mr. Samuelsson noted that Volvo has limited financial resources compared with its German rivals, so it will purchase the key electric drive train and batteries – the two most important parts in an electric vehicle – from outside manufacturers rather than making them itself. He mentioned that the company was already looking at batteries made by the South Korean firm LG.

He added that although the company has received financial support in the past from Chinese automaker Geely, which bought Volvo in 2010 from the American carmaker Ford, the rollout of electric cars “will be by our own efforts.”

Mr. Samuelsson, 66, came to Volvo in 2012 after a career at German truck producer MAN, which is owned by the Volkswagen Group. He has led the company to a sales surge, topping 535,000 cars in 2016, the first time it has crossed the half million barrier. He said Volvo is targeting sales of 800,000 vehicles a year by 2020 with its electric car plan. In contrast, BMW sold 2.3 million cars last year, including 62,000 electric vehicles.

“It was important for us to set a clear signal for our own team, the suppliers and customers,” Mr. Samuelsson said. “We must prepare our stakeholders for the arrival of electric cars.”

Volvo reckons that electric car sales won’t really take off until batteries are developed that give the cars a range of about 400-500 kilometers. When that happens, customers can drive the car all day and then recharge the batteries at night, Mr. Samuelsson said.

He also said Volvo had no plans to invest in the infrastructure necessary to build a grid of charging stations for Volvo cars, the way Tesla has.  But he noted that the Swedish carmaker is spending 5 percent of sales – about €1.6 billion – on research and development.

Clearly the scandal that has enveloped Germany’s makers over diesel emissions is working in the Swedish company’s favor. While the German firms must spend heavily to recall cars and update software in their diesel vehicles, Volvo is instead investing all its resources in electric car designs.

“As a Swedish manufacturer, we have a clear design language, and attach great importance to safety and environmental awareness,” Mr. Samuelsson said.

But he added that he was opposed to governments setting an arbitrary cutoff date for the prohibition of internal combustion engines and preferred the market to determine the transition period.

“This is not a purely German discussion,” he said. “There is no need for special legislation on the end of conventional gasoline engines. The internal combustion engine will only be replaced when there is a better alternative.”











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