Did Volvo just seal the combustion engine's fate?
Electric cars are transforming the auto industry much in the same way these juiced-up vehicles drive: You don't hear them coming -- until suddenly they're by you.
Volvo's ambitious plan to offer electric engines across its entire fleet highlights just how fast traditional carmakers are plugging in, even as sales of all-electric and hybrid vehicles in the U.S. remain fairly modest. But with Tesla (TSLA) recently cruising by Ford (F) and nip-and-tuck with General Motors (GM) as America's largest automaker by market value, the stodgy combustion engine is showing its age.
If you needed a blaring highway billboard that the venerable pistons-valves-gasoline era is waning, Volvo hoisted it for all to see on Wednesday, with its announcement that starting in 2019, its full lineup will have some kind of electric motor.
Volvo plans to launch five fully electric cars between 2019 and 2021, three of which will be sold under the Volvo brand and two high-performance models to be marketed under the company's luxury Polestar brand. Additional details about the vehicles will be announced at a later date.
The automaker also plans to provide a range of gasoline and diesel plug-in hybrids and mild hybrids, which Volvo said would be one of the "broadest electrified car offerings of any carmaker." The Swedish automaker, which was acquired by China's Geely Holding Group in 2010, has been developing electric vehicles for the past few years, such as a variant of its C30 hatchback and a hybrid-diesel version of its V60 station wagon.
Volvo sold a record 534,332 vehicles last year, and it expects to sell 1 million electrified vehicles in less than a decade.
"Frankly, it costs a lot of money to develop an electric vehicle," said Brett Smith of the Center for Automotive Research. "It's technology they're developing from scratch, which means a whole lot of R&D investment."
Other automakers are increasingly weaning themselves off gasoline-powered engines.
Mercedes-Benz parent Daimler on Wednesday also announced plans to invest 5 billion Chinese renminbi ($740 million) in a battery plant in China that it will run with China-based BAIC. The partners plan to sell electric vehicles under the Mercedes brand name by 2020.
Green vehicle demand is already booming in China. Forecasts are calling for sales of 580,000 units in 2017, an increase of 58 percent from 2016, even though the Chinese government eased up on subsidies.
"Many of the luxury brands are going to move in this direction over time just because their consumers really demands performance, said Smith. "In China right now, there is an enormous amount of enthusiasm for electrification."
Volvo also is being spurred by the success of Elon Musk's Tesla, which has a market valuation of $52.4 billion, topping Ford's (F) $46 billion and Fiat Chrysler's (FCAU) $16 billion, while GM's is just about $54 billion. Tesla shares, however, were punished on Wednesday (down 7.2 percent, or $25.53, to $327.09), amid worries about lower-than-expected sales of its Model S cars and Model X SUV caused by constrained supplies of batteries.
Analysts are now also worried about competition from Volvo and others. German luxury brand BMW expects to deliver 100,000 electrified vehicles this year. It also plans to debut a new i8 roadster in 2018, a fully electric Mini in 2019 and a fully electric X3 in 2020. Japanese automaker Honda (HMC) and partner Hitachi recently formed an electric vehicle joint venture, while Toyota (TM) has sold more than 10 million hybrids since 1997.
The Big 3 U.S. automakers are also pouring money into electric vehicles. GM this year began selling the Chevrolet Bolt for about $35,000 before government subsidies. Ford plans to spend $4.5 billion over the next five years on 13 new electric vehicles, including hybrid versions of its Mustang muscle car and F-150 pickup.
Meanwhile, Fiat Chrysler has announced plans for hybrid versions of some models such as the Pacifica minivan, though it has yet to unveil an electric-only vehicle.
Regardless, as Volvo has just demonstrated, the road ahead for carmakers looks increasingly electrified.
