In 2021, Volvo Cars plans to become an “all electric car company” by 2030, a move that will require a steady and secure supply of batteries for its vehicles.
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Volvo Cars’ new CEO and president has predicted that battery shortages will become a pressing concern for his sector and told CNBC the company has made investments that would help it gain a foothold in the market.
“Recently we made a pretty sizeable investment in Northvolt so we have control of our own battery supply going forward,” Jim Rowan, who got into the deal last month, told CNBC’s Squawk Box Europe on Thursday.
In March 2021, Volvo Cars announced that it plans to become an “all-electric car company” by 2030, a move that will require a steady and secure supply of batteries for its vehicles.
“I think battery supply is going to be one of those things that will be scarce in the coming years,” Rowan said.
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“And that’s one of the reasons we made this significant investment with Northvolt: so that we can not only have supply under control, but actually start developing our own battery chemistry and manufacturing facilities.”
This would allow Volvo Cars “to have full control of this electric propulsion motor going forward,” he said.
Gigafactory plans
In February, Volvo Cars and battery maker Northvolt announced they would build a battery plant in Gothenburg, Sweden, with construction scheduled to begin in 2023. According to the companies, the plant should have “a potential annual cell production capacity of up to 50 gigawatt hours.”
This corresponds to the supply of batteries for around 500,000 cars per year, it said. The companies’ plans to develop a gigafactory had previously been announced, although a specific location has not been confirmed at this time.
As the number of electric vehicles on our roads increases, battery power is becoming an increasingly important – and competitive – cog in the automotive sector.
Speaking to CNBC’s Annette Weisbach last year, Volkswagen CEO Herbert Diess stressed how important battery production would be in the years to come, noting that there were challenges.
“Battery could be, let’s say, a continuing constraint on EV growth over the next five to 10 years,” he said.
“Because the lead times are enormous. We need so much energy and cell production… [There is a] huge supply chain that needs to be built in the next few years and that will potentially lead to some limitations.”
More recently this month, Elon Musk highlighted the importance of lithium, a key component of the batteries used in electric vehicles. On April 8th, the Tesla CEO tweeted that the price of lithium had “risen to insane levels”!
“Tesla may need to go straight into mining and refining unless costs improve,” Musk said. “There is no shortage of the element itself as lithium is found almost everywhere on Earth, but the rate of extraction/refining is slow.”
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With its electrification plans, Volvo is in direct competition with long-established automakers such as Volkswagen, GM and Ford, as well as Tesla. Just this week, Ford CEO Jim Farley said his company plans to “challenge Tesla and everyone else to become the best EV maker in the world.”
During his interview with CNBC, Rowan was asked by Volvo Cars if there was any hope that Musk’s takeover of Twitter would prove to be a distraction for the Tesla CEO.
“I have no idea,” he replied. “One thing I know… I will not be distracted from what we have to do. And that is quite simply that we must continue our march towards electrification.”
Rowan spoke on the same day his company announced first-quarter 2022 results.
Revenue rose 8% to 74.3 billion Swedish kronor (about $7.56 billion). Earnings before interest and taxes were 6 billion kroner compared to 8.4 billion in the first quarter of 2021.
The company sold 148,295 cars in the first quarter, down 20% from the same period last year.
As with many businesses, supply chain issues continue to impact operations. “Semiconductor constraints continued to gradually improve,” the company said.
“However, due to a temporary shortage of a particular semiconductor, production slowed towards the end of the first quarter. This shortage is expected to continue in the second quarter.”
Looking ahead, the company expects “supply chains to improve in the second half of the year.”
– Chloe Taylor contributed to this article.