On Tuesday, Volvo took the world on a short journey to the future. Starting in 2019, every new model the Swedish automaker releases will run at least in part on electric power. “We are determined to be the first premium car maker to move our entire portfolio of vehicles into electrification,” Volvo chief Hakan Samuelsson said in a statement.
Between 2019 and 2021, Volvo will roll out five battery electric models, along with a cavalcade of plug-in hybrids and "mild hybrids," which supplement internal combustion engines with batteries and motors. The company isn't killing gas yet, but it's on its way.
It's a bold, almost hard to believe pronouncement. For all their hype, electric cars and hybrids still make up a tiny percentage of vehicle sales—for good reason. Batteries are expensive and heavy. Vehicles need charging infrastructure. Low gas prices (at least in the US) blunt the "save on fuel" sales pitch. By plunging fully into this space, Volvo appears equal parts visionary, zealot, and daredevil.
But take a close look and it will become evident that going electric isn't that risky at all. The international winds of regulation blow toward gas and diesel alternatives. The industry's Next Big Thing—autonomous vehicles—will be battery-powered. Even consumers, especially those at the top of the market—the place where Volvo’s customers like to hang—look to be interested in EVs.
So, in reality, Volvo and its competitors are being pushed into electric propulsion. The Swedes are just rolling with it—and boasting that they're driving the change.
No doubt it's good news for the planet. It also happens to be an excellent marketing strategy and a smart gambit to secure the company’s rep for decades to come. “There’s a big branding benefit to being first,” says Costa Samaras, who studies alternative energy at Carnegie Mellon University. “By announcing the end of the internal combustion engine, Volvo can plant a flag and hopefully attract some investment and talent."
To understand this move in context, let's take a brief trip overseas. Europe once depended on cleaner diesel engines to bring down CO2 emissions. But after Volkswagen got caught in 2015 cheating pollution standards, customers and regulators are more wary of the fuel. Diesel sales are down 20 percent in France and Belgium, and 45 percent in Norway, compared to 2011 figures. Big cities like Athens, Paris, and Madrid have announced they will ban diesel cars by 2025. France just said it aims to stop sales of diesel and gas vehicles by 2040. And the European Union will implement new and aggressive CO2 emissions limits in 2020.
Meanwhile, in China, drivers purchase half the world’s electric vehicles, and EVs must make up 12 percent of each manufacturer's sales by 2020. The country will likely get even more aggressive about electric and hybrid production this year. (Volvo, once owned by Ford, was acquired by Hangzhou-based Geely in 2010.)
These market shifts are why other carmakers are making moves similar to Volvo's. More than 30 fully electric vehicles are available on the international market, including models from BMW, Mercedes-Benz, and, yes, Tesla. There are dozens of plug-in hybrid models on dealer lots. Even large American automakers have their hybrids and electrics, including a Ford police car and Chevy's $30,000 Bolt EV.
But these are massive companies that operate on long timelines. It takes five to seven years to develop a new car. And for all the electric fanfare, Volvo will keep selling cars with plain old gas-burning engines for years. All new models will come only as hybrids or full electrics, but existing models will only make the switch when they're due for a full revamp (or they'll never go electric and get retired). Volvo R&D chief Henrik Green says that rollover will likely take five to seven years, starting in 2019, but wouldn't set a firm timeline. So expect the company to sell gas- and diesel-powered steeds until at least 2024.
But Volvo can throw the switch faster because it's unusually well-positioned to do so. It's smaller and nimbler than most of its competitors, and it has fewer types of cars to redesign or replace. Volvo delivered under 535,000 cars last year, while BMW and Mercedes-Benz each sold more than 2 million. The really big players like Volkswagen and Toyota move 10 million cars a year.
Volvo’s customer base also helps. A plug-in hybrid or fully electric system can cost thousands more to produce, and the automaker's monied clientele can better absorb the sticker shock. Those potential owners are also more likely to have access to a garage where they can plug their car in at night, or work at the kind of forward-looking company that offers charging at work.
Even in the US, and especially in California, battery electric and plug-in vehicles have become a sort of status symbol among these luxury buyers. “The prestige point of having an electric vehicle or plug-in hybrid now is very prevalent in that market segment,” says Byron Washom, who oversees sustainability initiatives at UC San Diego. “If you were driving up to a country club, and one person had a Tesla and another had a plug-in electric Volvo and another had a Hummer, that prestige factor is very clear.”
There's a bit of a bonus here too: This move could set Volvo up as a go-to autonomous vehicle partner, at a time when all sorts of companies are scrambling to catch the next dance. Electric power is ideal for AVs. Fleet operators will be eager to save on costs by charging up instead of visiting the pump, and the cars can coordinate with each other to optimize use of limited charging infrastructure.
And so Volvo's crazy gamble isn't so crazy—or even much of a gamble. And while there's value in making a headline-grabbing declaration, there’s more in actually doing the thing. “In 2019, the real metric will not be ‘When did you declare it?’ but ‘How many models do you have in your showroom for me to choose from?’” Washom says. The real electric race has only just begun.
