Volvo’s pledge to go electric rings in new era for scandal-hit car sector

All new Volvo models from 2019 will enjoy some form of electric propulsion. And Volvo’s not alone

Volvo made plain that one reason for its change has been pressure from customers (Reuters)

The world’s car industry took another step away from its 130-year association with the internal combustion engine this week as Volvo became the latest car maker to make a decisive switch to electrification of its output.

Volvo Cars’ president and chief executive, Hakan Samuelsson, announced that all new Volvo models from 2019 will enjoy some form of electric propulsion, either as hybrids that will retain a conventional petrol or diesel engine, or as purely electric models.

Depending on customer demand, when this generation of models reaches the end of its cycle in the mid-2020s, then the last ever Volvo car with a petrol or diesel motor could roll off the production lines, possibly coinciding with Volvo’s centenary year of 2027.

Mr Samuelsson said: “This announcement marks the end of the solely combustion engine-powered car. Volvo Cars has stated that it plans to have sold a total of 1 million electrified cars by 2025. When we said it we meant it. This is how we are going to do it.

“This is about the customer. People increasingly demand electrified cars, and we want to respond to our customers’ current and future needs. You can now pick and choose whichever electrified Volvo you wish.”

Manufacturers such as Volvo are also responding to tougher EU targets for emissions, where electric cars, with zero emissions at the point of use, can drastically improve the overall green credentials of a model range, especially for marques such as Volvo that tend to sell larger saloons and SUVs. Companies that fail to reach these targets of their production will be fined.

Based in Gothenburg, Sweden, Volvo Cars is now owned by Geely of China, and seems also to have been influenced by its parent’s activities a home, where there has been a radical shift in attitudes towards pollution.

China, motivated by a need to clean up its air and to reduce imports of oil, is now pushing electric vehicles hard. Last year Chinese electric vehicle sales reached 507,000 units, compared to 221,000 across Europe and some 157,000 in the US.

China’s electric vehicles sales are expected to jump to around 700,000 this year, and growth around the world, albeit from a very low base, is set to explode in the 2020s and 2030s, alongside increasingly “driverless” vehicles. Apple and Google are well known for their plans in this field, and Tesla, the world’s first electric-only car maker, is also one of its most valuable, its large silent and sporty saloons no longer such a rare sight in the more prosperous neighbourhoods of Western cities.

In Europe, Sweden’s neighbour, Norway, though oil-rich, leads the way to electrification, with four out of every 10 new cars electrically driven, and a massive public investment in infrastructure for charging points. These are essential in urban areas where electric cars cannot be easily charged from flats and terraced houses.

Volvo Cars will introduce a range of electrified cars, including five fully electric cars between 2019 and 2021, three of which will be Volvo models and two of which will be high-performance electrified cars from Volvo Car’s new premium brand, Polestar.

These five cars will be supplemented by a range of petrol and diesel plug-in hybrid and mild-hybrid 48-volt options on all models, representing one of the broadest electrified car offerings of any car maker, though other makers, notably Toyota, have been developing those options for much longer.

Indeed, with even the next generation of the Jaguar XJ limousine rumoured to be an electric model, every car maker is moving towards electrification at an accelerating rate. Some, such as Hyundai and Honda, are also developing electric motors using on-board hydrogen fuel cells, a still more ambitious technological change.

Customer resistance to electric-only vehicles on the grounds of limited range and high purchase cost is being eroded by rapid advances in battery technology, faster recharging and official incentives.

Significantly, too, this marks a further step back from the reliance on controversial diesel engines of so many European makers.

Volvo made plain that one reason for its change has been pressure from its customers, and this comes against a background of the VW diesel scandal and bad publicity about the health and environmental impact of the noxious emissions diesels can pump into congested cities.

Volvo was one of a number of makes, notably also including Peugeot, BMW, Mercedes-Benz and the VW Group that have invested heavily in diesel technology over many years. Other brands, such as Toyota, Nissan and Honda, where diesels have traditionally been a much smaller part of the product range – and where small petrol engines, pure electric or hybrids have figured more prominently – are being less badly hit by the backlash against diesel and the authorities’ moves to marginalise diesel cars.

Paris, Madrid, Athens and Mexico City, for example, are reportedly planning to ban the most polluting cars and vans by 2025. Beijing, long one of the dirtiest big cities on the planet, will replace its entire fleet of taxis with electric vehicles in the next five years. The Mayor of London, Sadiq Khan, will raise the capital’s congestion charge on diesels from £11.50 to £24 this October, with a move towards a ban on dirtier diesels from 2019. Some councils are also charging motorists more to park a diesel engine car.

It is a remarkable turnaround from the situation a little more than a decade ago when ministers were enthusiastically encouraging car buyers to switch to diesel. Although diesels tend to have lower CO2 emissions than petrol-engined cars, they also generally perform badly on emissions of nitrous oxide and “sooty” particles that have been linked to cancer and lung disease.

Disappointed diesel car owners have called for compensation, perhaps through a “scrappage scheme” to replace their cars with newer, cleaner machines.

Meanwhile, a collapse in diesel car resale values would also hit the finance arms of car makers, where vehicles sold on popular Personal Contract Plans offer customers a guaranteed price for them to buy their car when the initial lease period ends. When these PCPs were introduced they assumed diesel values would hold up; as they fall, though, more owners will simply walk away, rather than pay above the odds to buy the car, leaving the car companies covering the difference between what they expected to able to sell the car to the customer for, and what it is actually worth on the second-hand market – in effect a loss.

That could represent a very heavy burden for the car makers and their shareholders, not to mention a savage financial penalty for the diesel scandal.