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Volvo bids ‘adjö’ to the internal combustion engine

André Anwar
07 July 2017 | updated 07 July 2017

Volvo Cars has become the first major carmaker to move away from the internal combustion engine, announcing that all new Volvos will have an electric motor from 2019 onwards. The company aims to have sold a total 1 million electrified cars by 2025.

Stockholm. While German carmakers still find it difficult to move away from diesel engines, Volvo has become the first major carmaker in the world to commit to equipping all new models with electric engines – beginning in just 2019. The Swedish media spoke of a ‘new era’ and a ‘historical step’ in the wake of Wednesday’s announcement. 

“This announcement marks the end of the solely combustion engine-powered car,” said Håkan Samuelsson, president and chief executive of Volvo.

1 million by 2025

Volvo plans to introduce three new vehicle types. In addition to fully electric cars and plug-in hybrid cars, it will also launch ‘mild’ hybrid cars, in which a battery merely supplements an internal combustion engine. Volvo will also launch five fully electric cars between 2019 and 2021. 

The plan is to gradually ease into the electric era, with the goal of having sold 1 million electric cars by 2025. 

Success story

The once ailing Swedish carmaker was acquired in 2010 by the Chinese automobile group Geely. The Chinese were desperate for skills from the West and a trustworthy brad for global exports. 

After initial concerns over job cuts, the Chinese sale is now regarded as a success story: Volvo improves year on year, and more and more people are finding jobs at its headquarters in Gothenburg  

Risks and opportunities

With its massive smog problems in metropolitan areas, China has used this emergency to become the world’s largest seller of electric vehicles. 265,000 fully electric cars were sold in China in 2016. In Europe, only 110,000, according to EVVolumes.com.  

But Volvo’s plans are also very risky, wrote the Swedish newspaper SvD. The EV market is still not mature, development forecasts are unclear and only around 1 per cent of all cars sold worldwide are fully electric. It could still be too early for the electric transition, putting revenues at risk, warned the newspaper.

And yet as the old Volvos gradually disappear from its portfolio, sales for fully electric and hybrid cars are rising sharply at 40 per cent, even if total sales numbers are still low. Volvo could win big if it establishes itself in the electric market before VW or BMW – and at the same level as Tesla. 

In direct competition with Tesla

With Wednesday’s announcement – which can also be seen as a strategic marketing campaign – Volvo is entering into direct competition with Tesla. The US electric carmaker appeals wants to move from the niche market of wealthy but eco-minded customers to the mass market and is launching an affordable car-for-all with its new Model 3. Tesla hopes to deliver the first vehicles by the end of the month.

And the timing of Volvo’s announcement couldn’t be better. Volvo is currently booming, increasing its profits in 2016 by 67 per cent over the previous year to reach EUR 778 million. The carmaker expects to sell up to 800,000 cars by 2020. Its well-publicised entry into the electric market could also attract investors to a possible public listing of Volvo Cars. 

As Tesla shows, investors have now come to value electric cars. With only 84,000 vehicle sales in 2016, Tesla’s stock market value is already higher than global car giants like Ford, General Motors and BMW.