FILE PHOTO: An electric vehicle charging cable is seen on the bonnet of a Volvo hybrid car in this picture, figure 6 July 2017. REUTERS/Phil Noble/Illustration
GOTHENBURG (Reuters) – Volvo Cars expects that the margins on electric cars to match those of vehicles with internal combustion engine by 2025, the head of the Chinese ownership of the Swedish carmaker told Reuters.
The global car manufacturers are planning a $300 billion increase in spending on electric vehicles over the next five to 10 years, but have admitted that there is higher component of the cost and limited use in the first years will hit margins.
Volvo invests about 5 percent of the annual turnover, equal to slightly more than $1 billion per year, in a building without drivers and electric cars and has promised to provide five fully electric cars on the market in the coming years.
It showed the first less than a month ago, made by the luxury Polestar performance brand to rival to Tesla’s Model 3. It is also planning to launch a Volvo-brand electric compact SUV of the year in the company of the push for the diversion of 50 percent of the sales of fully electric cars in 2025.
“It is very difficult to say whether we are going to have the same margins in 2025 as we had in 2015 … because electric cars are very expensive,” Chief Executive Hakan Samuelsson told Reuters on the sidelines of a security showcase by the company in Gothenburg.
“But I would absolutely ensure that we have the same margins with electric cars as we will with conventional combustion cars in 2025.”
Samuelsson said the convergence would be helped by reducing the costs for components such as batteries and declining margins on conventional cars.
Reporting by Esha Vaish in Gothenburg; Editing by David Goodman