In 2021, Volvo Cars announced that it plans to become an “all-electric car company” by 2030, a move that will require it to have a consistent and secure supply of batteries for its vehicles.
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The new CEO and president of Volvo Cars predicts that the shortage of batteries will become a pressing problem for his sector, telling CNBC that the company has made investments that will help it establish itself in the market.
“We recently made a relatively significant investment with Northvolt to control our own battery shipments as we move forward,” Jim Rowan, who joined the business last month, told CNBC’s Squawk Box Europe on Thursday.
In March 2021, Volvo Cars announced that it plans to become an “all-electric car company” by 2030, a move that will require it to have a consistent and secure supply of batteries for its vehicles.
“I think the supply of batteries will be one of the things that will be scarce in the coming years,” Rowan said.
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“And that’s one of the reasons we’ve made this significant investment with Northvolt: so that we can not only control supply, but actually start developing our own battery chemistry and production facilities.”
This will allow Volvo Cars to be “in complete control of this electric drive for the future,” he said.
Plans for Gigafactory
In February, Volvo Cars and battery maker Northvolt said they would build a battery plant in Gothenburg, Sweden, with construction set to begin in 2023. According to the companies, the facility is set to “have potential annual cell production capacity up to 50 gigawatt hours. “
That would be enough to supply enough batteries for about 500,000 cars each year, they said. The companies’ plans to develop a gigafactory were announced earlier, although no specific location was confirmed at the time.
As the number of electric vehicles on our roads increases, the supply of batteries will become increasingly important – and competitive – gear in the automotive sector.
Speaking to Annette Weisbach of CNBC last year, Volkswagen CEO Herbert Dies stressed the importance of battery production in the coming years, noting that the challenges do exist.
“Batteries can be, say, a constant constraint on the growth of electric vehicles over the next five to 10 years,” he said.
“Because the implementation time is huge. We need so much energy and cell production … [There is a] a huge supply chain that needs to be set up in the coming years and this may lead to some limitations. “
Most recently, Elon Musk stressed the importance of lithium, a key part of batteries used in electric vehicles, this month. On April 8, Tesla’s CEO tweeted that the price of lithium had “gone to insane levels!”
“Tesla may actually need to go into mining and refining directly on a scale scale, unless costs improve,” Musk said. “There is no shortage of the element itself, as lithium is almost everywhere on Earth, but the pace of extraction / refining is slow.”
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Volvo’s electrification plans put it in direct competition with long-established carmakers such as Volkswagen, GM and Ford, as well as Tesla. Just this week, Ford CEO Jim Farley said his business planned to “challenge Tesla and all those who want to become the best electric car maker in the world.”
In an interview with CNBC, Rowan of Volvo Cars was asked if there was any hope that Musk would take over Twitter, which would turn out to distract Tesla’s CEO.
“I have no idea,” he replied. “I know one thing … I’m not going to be distracted by what we have to do. And it’s just that we need to continue our march towards electrification.”
Rowan spoke the same day his business announced the results for the first quarter of 2022.
Revenue rose 8% to SEK 74.3 billion (about $ 7.56 billion). Profit before interest and taxes amounted to 6 billion kroner compared to 8.4 billion in the first quarter of 2021.
The company sold 148,295 cars in the first quarter, a 20 percent drop from the same period last year.
As with many businesses, supply chain problems continue to affect operations. “Semiconductor restrictions have continued to gradually improve,” the company said.
“However, due to a temporary shortage of a particular semiconductor, production declined at the end of the first quarter. This shortage is expected to remain so in the second quarter.”
Looking ahead, the business said it expects “supply chains to improve in the second half of the year.”
-Chloe Taylor contributed to this article.
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