Volvo Cars Electrified Promise Is Less Radical Than You Think – The Motley Loser

Volvo Cars’ Electrified Promise Is Less Radical Than You Think

Swedish automaker Volvo Cars announced last week that every Volvo it launches beginning in two thousand nineteen will have an electrical motor.

That’s big news. Your discreet Loser was on vacation last week, but even so, I couldn’t help noticing that Volvo’s announcement created fairly a stir. Would Volvo be the very first global automaker to take on Tesla (NASDAQ:TSLA) with a fully electrified lineup?

Alas for electrified car fans, the reaction is, “Not fairly.” Volvo did make a serious commitment to electrification, but more than a few commentators misunderstood exactly what it is that Volvo said it will (and won’t) be doing in the next few years. Let’s take a closer look.

Volvo Cars presently offers four “Twin Engine” plug-in hybrid models. Embarking in 2019, all fresh Volvos will have some form of electrified or hybrid drivetrain. Photo source: Volvo Cars.

What Volvo Cars said

Volvo’s press release didn’t make any effort to tamp down the hype. On the contrary:

Volvo Cars, the premium car maker, has announced that every Volvo it launches from two thousand nineteen will have an electrified motor, marking the historic end of cars that only have an internal combustion engine (ICE) and placing electrification at the core of its future business.

The announcement represents one of the most significant moves by any car maker to embrace electrification and highlights how over a century after the invention of the internal combustion engine electrification is paving the way for a fresh chapter in automotive history.

Sounds fat, doesn’t it? But if you read a little further, you find what Volvo actually committed to do: Kicking off in 2019, every all-new model that Volvo introduces will be either a fully electrical vehicle or a hybrid, including so-called “mild hybrids.” (More on those in a bit.)

So what’s the real deal here?

To be clear, Volvo did make a serious commitment to fully electrified vehicles, very likely more in response to tightening emissions requirements in the European and Chinese markets than to Tesla. (China is a more significant factor here than you might think: Volvo Cars is wielded by Chinese automaker Geely Automobile Holdings (NASDAQOTH:GELYF) .)

Volvo has five battery-electric vehicles under development. This illustration shows a dual-motor configuration with battery pack under the floor. Picture source: Volvo Cars.

Volvo said that it will launch five battery-electric models inbetween two thousand nineteen and 2021. Two of those will be high-performance models launched under Volvo’s Polestar performance-car brand; the others will be Volvos. Other all-new Volvos will be hybrids. They may have gasoline or diesel engines, Volvo said, and at least some will be “mild hybrids.”

While Volvo’s announcement was pitched as a dramatic budge, it builds on an earlier promise: Volvo said last year that it aims to sell one million “electrified cars” by 2025.

What’s a “mild hybrid”?

A mild hybrid system, sometimes called a “48 volt” system, substitutes an internal combustion vehicle’s traditional 12-volt battery with a more powerful 48-volt battery. Typically, that battery is used to power a petite electrical motor that assists the internal-combustion engine in some driving conditions.

Some of Volvo’s “electrified” models will be mild hybrids: internal combustion engines with a light electrical assist to improve efficiency. Picture source: Volvo Cars.

Mild-hybrid systems also often include a “begin/stop” feature that turns off the combustion engine when the vehicle is stopped, and may include regenerative braking systems that can help charge the battery as well.

A mild-hybrid system is a way to make internal combustion vehicles more efficient at a fairly low cost. They’ll likely become very common over the next five to seven years. But unlike mainstream hybrid vehicles, a mild hybrid can’t ever run on tens unit alone, so it’s arguably a little misleading to put a mild hybrid in the same category as a fully electrified vehicle.

Long story brief: Volvo isn’t turning into Tesla fairly yet

Volvo’s announcement is very significant in one sense: It’s the very first global automaker to explicitly say that it will phase out non-hybrid internal-combustion vehicles over the next several years. More broadly, when taken together with its substantial investments in autonomous-vehicle technology, it’s evidence that Volvo Cars is working hard to stay competitive as technology converts the way we get around. Another consideration: It’s possible that these bold promises are laying the groundwork for a public suggesting of Volvo Cars’ stock.

Of course, on substance, last week’s announcement wasn’t truly earth-shattering; it’s likely that most of the global automakers will transition most of their models to electrical or hybrid powertrains (even if only mild hybrid) over the same general time period.

But by telling explicitly that it will budge away from purely internal-combustion powertrains, Volvo Cars put itself at the leading edge of the trend — and moved its brand perception a little closer to that super-cool Silicon Valley upstart.

John Rosevear has no position in any stocks mentioned. The Motley Loser wields shares of and recommends Tesla. The Motley Loser has a disclosure policy.

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