In 2021, Volvo Cars said it plans to become an “all-electric car company” by 2030, a move that requires it to have a consistent and safe supply of batteries for its vehicles.
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The new CEO and president of Volvo Cars has predicted that scarcity of battery power will become a pressing problem for his industry, and told CNBC that the company has made investments that would help it gain a foothold in the market.
“Recently, we’ve made a fairly substantial investment with Northvolt so that we have control over our own battery supply as we move forward,” Jim Rowan, who joined the company last month, told CNBC’s “Squawk Box Europe” on Thursday.
In March 2021, Volvo Cars said it plans to become an “all-electric car company” by 2030, a move that will require a consistent and safe supply of batteries for its vehicles.
“I think the supply of batteries will be one of the things that will become scarce in the coming years,” Rowan said.
“And that’s one of the reasons we’ve made that substantial investment with Northvolt: so that we can not only control supply, but actually start developing our own battery chemistry and manufacturing facilities.”
This would enable Volvo Cars to have “complete control of that electric propulsion engine for the future,” he said.
In February, Volvo Cars and battery manufacturer Northvolt said they would build a battery factory in Gothenburg, Sweden, with construction to begin in 2023. According to the companies, the facility will have “a potential annual cell production capacity of up to 50 gigawatt hours.”
This would equate to providing enough batteries for about 500,000 cars a year, they said. The firms’ plans to develop a gigafactory had been previously announced, although a specific location was not confirmed at the time.
As the number of electric vehicles on our roads grows, battery supply will become an increasingly important – and competitive – cog in the automotive sector.
Speaking to CNBC’s Annette Weisbach last year, Volkswagen CEO Herbert Diess emphasized how important battery production would be in the coming years, noting that there were challenges.
“Batteries can be, say, a continuous constraint on the growth of EVs over the next five to 10 years,” he said.
“Because the lead times are huge. We need so much energy and cell production… [There is a] huge supply chain that needs to be set up in the coming years, and that will, that can lead to some limitations.”
More recently, Elon Musk this month highlighted the importance of lithium, a key component of the batteries used in electric vehicles. On April 8, the CEO of Tesla tweeted that the price of lithium had “risen to insane levels!”
“Tesla may need to go directly into mining and refining at scale unless costs improve,” Musk said. “There is no shortage of the element itself as lithium is almost everywhere on Earth, but the rate of extraction/refining is slow.”
Volvo’s electrification plans put it in direct competition with long-established automakers such as Volkswagen, GM and Ford, as well as Tesla. This week, Ford CEO Jim Farley said his company plans to “challenge Tesla and all newcomers to become the best EV maker in the world.”
During his interview with CNBC, Volvo Cars’ Rowan was asked if there was any hope that Musk’s takeover of Twitter would be a distraction for Tesla’s CEO.
“I have no idea,” he replied. “I know one thing … I will not be distracted from what we have to do. And that is, very simply, that we must continue our march towards electrification.”
Rowan spoke on the same day his company announced its first quarter 2022 results.
Sales grew 8% to 74.3 billion Swedish krona (about $7.56 billion). Earnings before interest and tax came in at 6 billion kronor, compared to 8.4 billion in the first quarter of 2021.
The company sold 148,295 cars in the first quarter, which it said was a 20% decrease compared to the same period last year.
As with many businesses, supply chain issues continue to impact business operations. “The limitations of the semiconductors continued to improve gradually,” the company said.
“However, due to a temporary shortage of a particular semiconductor, production declined towards the end of the first quarter. This shortage is expected to continue into the second quarter.”
Looking ahead, the company said it expects “supply chains to improve in the second half of the year”.
—Chloe Taylor contributed to this article.