Volvo Automobiles’ CEO Jim Rowan sees electrical automobiles reaching worth parity with their fossil fuel-burning counterparts so much earlier than many.
How quickly? Roughly two to 3 years from at this time.
Moreover, Rowan mentioned: “There is not any manner that any firm ought to be counting on authorities subsidy to achieve success.”
The previous Dyson CEO, who took the helm of Volvo originally of this 12 months, made the daring claims amid excessive battery supplies prices, the latest passage of the Inflation Discount Act — and Volvo’s launch final week of a flagship electrical crossover.
The seven-seat EX90, the primary Volvo constructed on an EV-only structure, units the Swedish automaker on a dash to go totally electrical by the start of the subsequent decade.
However to get there, Rowan mentioned, Volvo should get EV costs down fast.
“We expect we get [to price parity] … round 2025, the place there will be sufficient know-how that is driving down price on the battery,” Rowan informed Automotive Information Europe on the sidelines of a media occasion in Stockholm, Sweden. “Expertise will drive vary up. Much less batteries, however extra vary, at much less price — we’ll get there.”
Smaller fashions may also assist Volvo decrease EV costs.
Subsequent 12 months Volvo will reveal a diminutive crossover, which Rowan mentioned shall be a “metropolis automobile geared toward a youthful demographic who can subscribe to it.”
The crossover will slot beneath the XC40 and C40 compact crossovers and will arrive in U.S. shops late 2023, based on AutoForecast Options. It’s a part of a wave of EV fashions, together with a sedan and two sporty wagon-like fashions, anticipated from Volvo within the subsequent few years.
However Rowan veers from a few of his trade friends who anticipate larger battery and uncooked materials prices to elevate sticker costs.
“I don’t see this parity getting shut,” Renault Group CEO Luca de Meo informed reporters on the Paris auto present final month. “I can provide you with higher battery chemistry and higher energy electronics, however these features can be erased when the value of cobalt doubles in simply six months.”
EV analyst Sam Abuelsamid mentioned Rowan’s worth parity goal will not be “unreasonable” for a luxurious automaker.
A premium model has extra “margin headroom”, so it may possibly scale back margins on EVs to get parity on the buyer stage, mentioned Abuelsamid, principal analyst at Guidehouse Insights.
“Within the segments that Volvo competes, it is positively potential,” he mentioned. “In additional mainstream segments, you do not have that margin headroom to work with.”
Battery costs have sunk 80 to 90 % over the previous 12 years. Nevertheless, provide chain difficulties and surging demand for uncooked supplies from a quickly electrifying auto trade have elevated battery costs within the final two years.
Based on Work together Evaluation, the common worth of a motor for battery EVs, gas cell EVs and hybrids rose 26 % in 2021 and is anticipated to rise once more in 2022.
Nevertheless, Abuelsamid expects a pricing pullback as extra mining and processing capability comes on-line and various chemistries resembling lithium iron phosphate (LFP) are extra broadly adopted.
Volvo battery provider CATL has had success making LFP packs extra reasonably priced. A latest teardown of the Chinese language firm’s LFP pack use in Shanghai-built variations of the Tesla Mannequin 3 revealed that CATL’s resolution was the worldwide chief in affordability at $131 per kilowatt hour.
Volvo mentioned it goals to have its battery pack prices right down to lower than $100 per kWh by 2025-26.
The federal authorities’s push to broaden the nation’s public charging infrastructure can be key to assembly Rowan’s prediction.
The Biden administration has unlocked greater than $1.5 billion in funding in 2022-23 to construct EV chargers throughout roughly 75,000 miles of U.S. freeway, together with interstates and various gas corridors.
This system makes $5 billion obtainable over the subsequent 5 years to assist states obtain President Joe Biden’s objective of 500,000 EV charging stations throughout the U.S. by 2030.
“It is some huge cash,” Rowan mentioned. “That is an awesome factor, and I feel that can drive adoption towards BEV.”
Washington is yanking one other lever to drive EV adoption and funding within the U.S.
The Inflation Discount Act, handed in August, consists of provisions to spice up U.S. manufacturing of electrical automobiles and batteries, together with new sourcing necessities for automobiles to qualify for EV tax credit.
The regulation creates a credit score for battery cells equal to $35 per kilowatt hour of capability, with battery packs eligible for a credit score of as much as $10 per kilowatt hour. It additionally supplies a ten % credit score for important minerals manufacturing.
Volvo’s South Carolina-made, sub-$80,000 EX90 partially qualifies for the $7,500 federal EV tax credit score. However family revenue caps will exclude many patrons from having the ability to declare the subsidy.
“We’ll profit [from the Inflation Reduction Act] after we get to the smaller SUVs that we’ll convey,” Rowan mentioned, as a result of it will be focused to “a demographic that is obtained much less family revenue as a result of it is their first automobile.”
Douglas A. Bolduc contributed to this report.