Why Volvo's Chinese parent company sparked an all-electric push
Published Wednesday, July 5, 2017 8:28PM EDT
Volvo is electrifying its entire car lineup starting in 2019, making it the first major traditional automaker to fully turn its back on pure internal combustion power.
The decision by the Sweden-based company will mean in two years’ time, all new Volvo vehicles will have some form of electric propulsion.
Chief executive officer Hakan Samuelsson said the move was driven by customer demand. Nowhere is that demand stronger than in the home of Volvo’s parent company -- Zhejiang Geely Holding Group. The Chinese carmaker acquired Volvo from Ford back in 2010.
Volvo sold more than 90,000 cars and SUVs in China in fiscal 2016, making it the company’s number one national market by volume.
Most North American drivers have never heard of Geely. The company was founded in 1986, and got its start making refrigerators. It’s a relatively small fish in a sea of massive global automakers.
The company’s Geely-badged lineup of sedans, hatchbacks, and crossovers are primarily sold in China, but the company’s appetite for acquiring struggling automotive brands suggests a broadening reach to foreign shores.
Its aggressive push into high-end hybrid-powered cars through its Volvo arm is aimed squarely at celebrated global luxury automotive technology leaders like Toyota’s Lexus brand and Tesla.
Geely’s bet that the era of the gas guzzler is coming to an end also dovetails nicely with China’s growing appetite for electric powered cars, as well as the country’s emergence as a world leader in battery technology.
Electric vehicles are surging in popularity among Chinese drivers. China was by far the largest buyer last year, with 336,000 electric cars registered, according to the International Energy Agency’s 2017 Global EV Outlook. That’s more than double the number that hit the road in the U.S.
Chinese battery power
Beijing is anxious to exploit the rising demand for electric cars in China, and equally eager to see its domestic battery manufacturers export power storing technology more cheaply and effectively than China’s global rivals. Aggressive government policies and generous subsidies for electric vehicles are at work to ensure that happens.
With batteries making up the most expensive components in electric vehicles, manufacturing at scale to keep costs low will be the key to dominating the global market.
While Tesla’s Gigafactory has received wide-spread attention, China’s Contemporary Amperex Technology Ltd., which counts Geely as a customer, has plans to build the largest lithium-ion megafactory in the world.
Morgan analyst Shawn King wrote in a report released in January that Chinese battery vendors could slash their prices between 35 and 40 per cent from currently levels and still make a profit.
Electric and hybrid vehicles are still only a small fraction of new cars sales globally, but PricewaterhouseCoopers analyst Darren Jukes expects manufacturers will be keen feed the growing demand.
“Consumers are generally demanding more electric vehicles, and the manufactures are all having to respond to that,” he told CTV News on Wednesday.