Volvo chief warns competitors on moving too slow into EVs

Commenting on his competitors’ slower move to electric vehicles, new Volvo Cars chief Jim Rowan said it’s a bad idea to tiptoe toward an electric future while continuing to develop combustion engine models.

Hedging bets by investing in internal combustion engine and battery-electric vehicles “risks missing the market,” Rowan said on an earnings call last week.

The Swedish automaker has one of the industry’s most aggressive electrification timetables, with plans to go all-electric globally by the turn of the next decade.

Volvo will bookend its crossover lineup with two new electric models this year and launch a new EV every year for the next three or four years. The EX90 large crossover and an entry-priced small crossover will go into production by the end of this year, said Rowan, who took over the top job last year.

Rowan said an aggressive investment strategy will position the luxury automaker to capitalize on the building demand for EVs globally.

“The big problem with industry transitions is if you don’t invest ahead of the curve, then you miss that inflection point, and you’re not ready for when the market changes,” he said. “We are investing ahead of the curve.”

According to data from LMC Automotive, EV sales surged 72 percent globally to 7.97 million vehicles last year. Nearly 10 percent of new light vehicles sold in 2022 were BEVs, LMC noted.

“The market is moving towards electrification, and you best get ready,” Rowan said on the call. “We’ve been bold enough [to] invest ahead of that inflection point, which we know [will] come.”

EVs accounted for 11 percent of Volvo’s global sales last year compared with 4 percent the previous year. By mid-decade, Volvo expects zero-emission vehicles to account for half of its sales.

But the long-term momentum is tempered by near-term headwinds.

Volvo’s margins on BEVs took a hit from high raw material costs, principally in lithium, a key element in vehicle batteries.

“That’s pretty much the only thing that stands in the way of full-scale adoption,” Rowan said. Lithium mining and processing bottlenecks are driving up the price, he said.

“We are in discussions with mines and processing factories to get direct access to [lithium] at more predictable costs,” he said.

Rowan said battery technologies such as lithium iron phosphate will help reduce battery costs and bring EV prices in line with combustion engine equivalents.

“We think we’ll get to price parity by 2025, which is when I think that inflection point kicks in, and the market goes towards a much higher gradient toward full BEV adoption,” he said.

The two planned electric crossovers will double the number of fully electric vehicles in Volvo’s portfolio and drive EV share next year.

The EX90 rides on a new all-electric Volvo-developed platform. The seven-seat crossover will be available in a twin-motor, all-wheel-drive version at launch and will start at less than $80,000. A 111-kilowatt-hour battery delivers 496 hp and an EPA-estimated range of up to 300 miles.

Early demand for the flagship EV is “beyond our expectations,” Rowan said on the call, adding that the EX90 will provide a sales “tail wind.”

But he said supply this year will be limited because of production not beginning until “well into the fourth quarter.”

Research firm AutoForecast Solutions expects the output of the Charleston, S.C.-made EX90 to hit 60,000 in the first full calendar year.

The small crossover, expected to be called the EX30, is billed as a conquest vehicle.

It “is going to take up a new position in the market,” Rowan said. “It will bring in different demographics for us as a brand.”

The model will slot below the XC40 and C40 compact crossovers, and it will share the Sustainable Experience Architecture that Volvo helped parent Zhejiang Geely Holding Group develop.

AutoForecast Solutions expects production of the China-made EX30 to reach 40,000 vehicles in the first full calendar year.

Volvo will offer the EX30 via its vehicle subscription service.

“That’s going to allow us to talk to brand-new customers … and in many cases Gen Z who are coming into the car market for the first time because it makes it affordable,” Rowan said. “The price of that car is going to be lower, and when you add subscription-based ownership, you’re only signing up for a minimum of three months.”