Volvo Isn t the Only Car Maker That Isn t Keen on Gasoline
Volvo Isn’t the Only Car Maker That Isn’t Keen on Gasoline
Volvo Cars is violating up with the internal combustion engine after ninety years and moving on to greener pastures.
The Swedish automaker is the very first major brand to say it will stop producing cars powered only by internal combustion, announcing Wednesday, July five that all Volvos launched from two thousand nineteen will have an electrical motor.
“Volvo Cars has stated that it plans to have sold a total of 1m electrified cars by 2025,” CEO Hakan Samuelsson said in a statement. “When we said it we meant it. This is how we are going to do it.”
The company said it would launch five fully electrified cars inbetween two thousand nineteen and 2021, in addition to a range of hybrid cars. Hybrids use electrical power to supplement traditional engines, including those powered by petroleum and diesel.
While other car companies have set similar goals – Volkswagen Group (VLKAF) has also targeted one million electrical car sales by two thousand twenty five – Volvo’s announcement is notable because it represents a core shift in strategy for a major producer. Volkswagen sold more than ten million cars last year, while Volvo sold about 500,000.
Samuelsson said the company was responding to shifting consumer request, as well as an internal purpose of climate-neutral manufacturing by 2025.
“Volvo is making an aggressive budge to take advantage of growing market opportunities,” Electrical Drive Transportation Association spokeswoman Christine Spann said in an email.
Electrified vehicles are on the rise among both large-scale and niche producers. Large car companies such as Nissan Motor Company LTD (TYO) , Volkswagen, and General Motors Company (GM) have all invested in electrical, while stock market beloved Tesla Inc. (TSLA) , an entirely electrical producer, has surpassed all of them besides Volkswagen in market capitalization despite delivering only a fraction of the number of vehicles.
The U.S. Energy Information Administration projects sales of light-duty battery electrical, plug-in hybrid electrical, and hydrogen fuel cell vehicles to reach 1.Five million cars in 2025, or about 9% of the total projected light-duty vehicle sales that year.
Sales will benefit from state programs such as California’s Zero-Emission Vehicle regulation as well as the plummeting cost of battery manufacturing. A report released in January from McKinsey & Company said the cost of electrified vehicle batteries had dropped about 80% in six years.
Despite rebate programs and declining battery costs, the path to profitability for electrical so far has been fraught. For example, despite its high valuation, Tesla is not yet profitable, operating at a margin of -8.28%, according to TheStreet ratings.
GM, focusing on cost reductions, has said it aims to be the very first automaker to sell electrified vehicles profitably. Meantime, Volkswagen hopes its aim of one million electrified vehicles by two thousand twenty five will give it “leapfrogging cost advantages” that will propel the company’s electrical cars to profitability.
According to McKinsey, battery costs are likely to serve as a barrier to profitability until inbetween two thousand twenty five and 2030. They estimate that a sixty kWh battery costs about $13,600 based on current prices, but that costs will proceed to decline.
Volvo is wielded by Hong Kong-based Geely Automobile Holdings, and stands to build up from its parent company’s investments in electrified. China is the largest auto market in the world, with rapidly expanding request for electrified vehicles.
Editor’s Pick: This article was originally published on July Five, 2017.
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