Volvo has taken what seems to be a bold step. By 2019, it’s going to only introduce new models with hybrid, or fully electrical, engines. If you know the economics behind it, it makes a lot of sense. But the key issue for the auto industry is that while Volvo may be the first to bury the conventional gas engine, it’s not going to be the last.
Volvo will still, after 2019, make cars with conventional engines, according to the New York Times, although it expects those to be fully phased out by 2024. It’s simply redirecting its research and development money towards hybrids and electric cars, in part because Volvo’s owner, the Chinese car manufacturer Geely, is the market leader in electric vehicles in China and that gives Volvo a strong research base. In other words, it’s simply cheaper for Volvo to make the call now, than gamble on the life of the combustion engine. Besides, hybrids still burn gas, just a lot less of it.
As a small player in the U.S., Volvo’s selling 82,000 cars in 2016 out of the 17 million that Americans bought. Nonetheless, its decision is a reflection of the reality of the auto industry. Despite the whining about the economic effects of emissions regulations from some quarters of the American government, those regulations are worldwide and becoming stricter with each passing year.
Volvo is also simply leaning into what many believe, that the electric vehicle’s dominance in America is just a matter of time. Tesla may be a boutique manufacturer of luxury vehicles, but that hasn’t stopped it from becoming, at least by value of its stock, the biggest American automaker. In the end, it’s a question of technology. Electric cars have relatively limited ranges due to their efficiency and the power of their batteries. Both, however, are improving all the time; Tesla’s Model 3, arriving today, has a range of over 200 miles, and Americans drive, on average, thirty miles a day.
Even if electric vehicles remain relatively rare for the foreseeable future, a combination of ecological and economic concerns are going to make them more commonplace. And, of course, this assumes the price of gas is going to stay low forever. That’s never been a safe bet, and depending on when it rises again, Volvo might find itself in just the right place in just the right time.
(Via New York Times)