Volvo says it is on track for cost parity between electric and combustion-powered vehicles by 2025, helped by the elimination of reliance on internal combustion engine development.
The company’s chief commercial officer and deputy CEO Bjorn Annwall told Car Expert that, unlike some brands that persist with internal combustion development, Volvo’s commitment to becoming a battery electric vehicle company by 2030 means it has the potential for cost parity by mid-decade.
“I think it’s very important that you get cost parity between BEVs [battery electric vehicle] and ICE,” Mr. Annwall said.
“Our entire technical roadmap is aimed at achieving that, which is that by the middle of the decade, the cost for BEVs should be the same as ICEs. And that’s why we have to work on optimizing the full flow with different ways to get it out.
“That said, it may be easier to achieve for premium car manufacturers than mass manufacturers. That’s why it can happen faster for Volvo which is also like I said, we are a relatively small brand, so of course, we can drive this faster than a kind of cheap mass brand with a different brand position. But I’m sure we’ll get there.”
EVs typically have a higher upfront cost than comparable combustion-powered vehicles, and much of that extra cost is due to the large battery that sits underneath.
Volvo has previously said it aims to reach battery pack costs of $100 per kilowatt hour (kWh) by 2025-26, although the cost of raw materials has risen. The CATL-sourced lithium iron phosphate battery in the Tesla Model 3 is currently the global leader in affordability according to a recent teardown, costing $131 per kWh.
There’s currently a roughly $20,000 gap between the most affordable version of the petrol-powered XC40 and its electric XC40 Recharge, although there are also spec differences that cloud the comparison.
As Mr Annwall said, it was easier for Volvo to achieve cost parity than other big-name carmakers given its premium position. But it also shows how companies like Toyota, which have a less stringent approach could struggle in the transition to full electrification in the future.
The legacy automaker will likely continue to develop internal combustion engines for a large number of markets, while still focusing on electrification for others.
It also suggests that we won’t see cost-effective electric vehicles for the average consumer for some time given the lack of electric vehicle companies looking to serve the lower end of the consumer market.