In 2021, Volvo Cars said it planned to become an “all-electric car company” by 2030, a move that will require it to have a constant and safe supply of batteries for its vehicles.
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The new CEO and president of volvo cars has predicted that battery supply shortages will become a pressing issue for its sector, telling CNBC that the company has made investments that would help it gain a foothold in the market.
“We recently made a reasonably substantial investment with Northvolt so we are in control of our own battery supply as we go forward,” Jim Rowan, who joined the business last month, told “Squawk Box Europe” on Thursday. from CNBC.
In March 2021, Volvo Cars said it planned to become a “all-electric car company” by 2030, a move that will require you to have a constant and secure supply of batteries for your vehicles.
“I think battery supply is going to be one of the things that’s going to be in short supply in the next couple of years,” Rowan said.
“And that’s one of the reasons we made that substantial investment with Northvolt: so that we can control not only the supply, but we can start developing our own battery chemistry and production facilities.”
This would allow Volvo Cars to have “full control of that electric drive motor for the future”, he said.
In February, Volvo Cars and battery maker Northvolt said they build a battery manufacturing plant in Gothenburg, Sweden, and construction will 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 be the equivalent of supplying 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 sector.
“Batteries could be, shall we say, a continuing constraint to the growth of electric vehicles in the next five to 10 years,” he said.
“Because the lead times are huge. We need so much power and cell production… [There is a] huge supply chain that needs to be established in the next few years, and that could lead to some limitations.”
More recently this month, Elon Musk highlighted the importance of lithium, a key part of batteries used in electric vehicles. On April 8, the Tesla CEO he tweeted that the price of lithium had “reached insane levels.”
“Tesla may have to go into mining and refining directly at 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/refinement is slow.”
Volvo’s electrification plans put it in direct competition with long-established automakers like Volkswagen, GM Y Fordas well as Tesla. Just this week, Ford CEO Jim Farley said his business planned “It challenges Tesla and all participants to become the world’s leading electric vehicle manufacturer.”
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 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 simply that we need to continue our march towards electrification.”
Rowan spoke on the same day her company announced first-quarter 2022 results.
Revenue grew 8% to SEK 74.3 billion (about $7.56 billion). Earnings before interest and taxes were 6 billion kroner, compared with 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% drop compared to the same period last year.
As with many businesses, supply chain issues continue to affect operations. “Semiconductor restrictions continued to gradually improve,” the company said.
“However, due to a temporary shortage of a specific semiconductor, production was reduced at the end of the first quarter. This shortage is expected to continue in the second quarter.”
Looking ahead, the company said it expected “supply chains to improve in the second half of the year.”
—Chloe Taylor contributed to this article.