Volvo stunned the world last Wednesday when they announced beginning in 2019, they would begin to phase out gas only vehicles and replacing them with hybrid and electric models. The company claims this strategy heralds "a new chapter in automotive history". This move is an about-face for the Swedish automaker. Previously, the company said electric vehicles didn't make a great business case.
But there is more to this decision than meets the eye. Automotive News reports that a key reason for Volvo's electrification plans comes down to the increasing regulation on carbon dioxide (CO2) emissions in three key markets; Europe, China, and U.S. Tim Urquhart, principal analyst at IHS Markit tells AN that Volvo would struggle to meet the tougher targets on their larger vehicle without some sort of electrification.
"They've looked at the targets, and thought, we need to take serious action."
Another reason comes in part from the fallout of the Volkswagen diesel emission scandal. Automakers in Europe were using diesel engines as they produced 15 to 20 percent less CO2 emissions. But the backlash against diesel after the scandal has caused buyers to look elsewhere. In Germany for example, sales of diesel vehicles dropped to 39 percent in June - this figure was almost 50 percent the same time last year.
"Diesel was their main weapon of choice to hit these regulations. Now they have to come up with a plan B," said Matthias Schmidt, automotive market analyst for AID.
According to data from AID, 83 percent Volvo's 2016 sales in Europe were comprised of diesels. This is high when compared to BMW (73 percent), Mercedes-Benz (73 percent), and Audi (68 percent). Only Land Rover (96 percent) and Jaguar (84 percent) were higher.
Source: Automotive News (Subscription Required)