In 2021, Volvo Cars said it plans to become an “all-electric car company” by 2030, a move that will require it to have a constant and secure supply of batteries for its vehicles.
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Volvo Cars’ new CEO and chairman has predicted that the scarcity of battery supply will become a pressing issue for his industry, telling CNBC the company has made investments that will help it gain a foothold in the market.
“Recently we made a reasonably substantial investment with Northvolt, so we control our own battery supply as we move forward,” Jim Rowan, who joined the company last month, told “Squawk Box” on Thursday. Europe” from CNBC.
In March 2021, Volvo Cars said it plans to become an “all-electric car company” by 2030, a move that will require it to have a constant and secure supply of batteries for its vehicles.
“I think battery supply will be one of the things that will become scarce in the years to come,” Rowan said.
“And that’s one of the reasons we’ve made this substantial investment with Northvolt: so that we can not only control supply, but we can actually start developing our own battery chemistry and production facilities. .”
This would allow Volvo Cars to have “full control of this electric propulsion engine for the future”, he said.
In February, Volvo Cars and battery maker Northvolt announced they would build a battery manufacturing plant in Gothenburg, Sweden, with construction expected to begin in 2023. According to the companies, the facility is expected to “have a capacity of potential annual cell production of up to 50 gigawatt hours.”
That would be equivalent to providing enough batteries for around 500,000 cars each year, they said. The companies’ 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 increases, battery supply will become an increasingly important and competitive cog in the automotive industry.
Speaking to CNBC’s Annette Weisbach last year, Volkswagen CEO Herbert Diess highlighted how important battery production will be in the years to come, noting that challenges exist.
“Batteries could be, say, a continued constraint to EV growth over the next five to 10 years,” he said.
“Because the deadlines are huge. We need so much energy and cell production… [There is a] a huge supply chain that needs to be put in place in the next few years, and that will cause, it could cause constraints.”
More recently this month, Elon Musk highlighted the importance of lithium, a key component of batteries used in electric vehicles. On April 8, Tesla CEO tweeted that the price of lithium had “reached insane levels!
“Tesla may actually have to go straight to large-scale mining and refining unless costs improve,” Musk said. “The element itself is not missing, because 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 like Volkswagen, GM and Ford, as well as Tesla. Just this week, Ford CEO Jim Farley said his company plans to “challenge Tesla and all newcomers to become the world’s leading electric vehicle maker.”
During his interview with CNBC, Volvo Cars’ Rowan was asked 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. “I know one thing…I will not be distracted from what we need to do. And that is, quite simply, that we need to keep moving towards electrification.”
Rowan was speaking 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 amounted to 6 billion crowns, 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 down 20% from the same period last year.
As with many businesses, supply chain issues continue to impact operations. “Semiconductor stresses have continued to gradually improve,” the company said.
“However, due to a temporary shortage of a specific semiconductor, production was down at the end of the first quarter. This shortage is expected to continue into the second quarter.”
Looking ahead, the company said it expects “improvement in supply chains in the second half of the year.”
—Chloe Taylor contributed to this article.