Volvo’s Electric Car Announcement: Turning Point or Nonevent?

By Earl J. Ritchie, Department of Construction Management

Volvo’s recent announcement to have all new models “electrified” beginning in 2019 has received wildly enthusiastic responses from the environmental and electric car communities. Response in the business and automotive press has been more muted. Many articles have pointed out that other manufacturers are introducing electrified models and the move to electrification is driven largely by European emissions requirements.

The decision has been a great PR move for Volvo but carries some risk and will have little impact in the broader auto market.

What the Volvo announcement actually means

Volvo did not say they would do away with fossil fuel powered cars. The planned model mix would include pure electrics, plug-in hybrids and conventional hybrids. The latter two run on a mix of fossil fuel and battery power. They will continue to sell existing fossil fuel powered models to the end of their model life.

Not including numerous engine and trim variants, Volvo has six models on the U.S. market. The luxury SUV XC90 is available as a plug-in hybrid, which adds an electric motor to the standard gasoline engine. Two additional models will be available as hybrids in the 2018 model year. Given normal model life, gasoline engine models will likely be available through 2025.

What the announcement means to the market

There are at least 35 electric or hybrid models already available from other manufacturers, with dozens of forthcoming models announced. The Volkswagen Group alone plans more than 10 models next year and more than 30 by 2025.

Volvo is a niche player with well under 1% of the market, both U.S. and worldwide. Given their small market share and the number of competing models, Volvo’s overall impact is likely to be insignificant. They may continue to have a significant presence in limited markets, such as in European plug-in hybrid sales where Volvo currently has about 5% market share.

The announcement as a symbolic act

The Volvo announcement has been called historic, a landmark, a major move, the beginning of the end of the internal combustion engine and similar dramatic phrases. It has certainly been an effective attention-getting device for both Volvo and the media.

However, forecasts of dramatic increases in the share of electric vehicles resulting from the European Union’s carbon reduction targets have been around for some time. Visions of the market range from forecasts of “modest levels” of electric vehicle market share to proposals to completely ban gasoline powered cars.

Predictions of a shift to electrification due to EU emission regulations and proposed bans by Germany and France have received extensive press coverage. The Volvo announcement is unique in coming from a mainstream auto manufacturer. A similar announcement by a major car manufacturer, such as Volkswagen or Toyota, would be much more significant.


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