In 2021, Volvo Cars said it planned to become a “fully electric car company” by the year 2030, a move which 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 has predicted that scarcity of battery supply will become a pressing issue for his sector, telling CNBC the firm has made investments that would help it gain a foothold in the market.
“Recently, we made a reasonably substantial investment with Northvolt, so that we are in control of our own battery supply as we go forward,” Jim Rowan, who joined the business last month, told CNBC’s “Squawk Box Europe” Thursday.
In March 2021, Volvo Cars said it planned to become a “fully electric car company” by the year 2030, a move which will require it to have a consistent and secure supply of batteries for its vehicles.
“I think battery supply is going to be one of the things that comes into scarce supply in the years to come,” Rowan said.
“And that’s one of the reasons we made that substantial investment with Northvolt: So that we can be in control not just of the supply, but we can actually start to develop our own battery chemistry and production facilities.”
This would enable Volvo Cars to be “in complete control of that electrical propulsion engine for the future,” he said.
In February, Volvo Cars and battery maker Northvolt said they would build a battery manufacturing plant in Gothenburg, Sweden, with construction set to begin in 2023. According to the companies, the facility is set to “have a potential annual cell production capacity of up to 50 gigawatt hours.”
This would equate to supplying enough batteries for around 500,000 cars every year, they said. The firms’ 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 might be, let’s say, a continuous constraint for the growth of EVs over the next five to 10 years,” he said.
“Because the lead times are huge. We need so much energy and cell production … [There is a] huge supply chain which has to be set up within the next years, and that will, that might, lead to some constraints.”
More recently, this month saw Elon Musk highlight the importance of lithium, a key part of the batteries used in electric vehicles. On April 8, the Tesla CEO tweeted that lithium’s price had “gone to insane levels!”
“Tesla might actually have to get into the mining & 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 pace of extraction/refinement is slow.”
Volvo’s electrification plans put it in direct competition with long-established automakers like Volkswagen, GM and Ford, as well as Tesla. Just this week, Ford CEO Jim Farley said his business planned to “challenge Tesla and all comers to become the top EV maker in the world.”
During his interview with CNBC, Volvo Cars’ Rowan was asked if there was a hope Musk’s takeover of Twitter would prove to be a distraction for the Tesla CEO.
“I have no idea,” he replied. “I know one thing … I will not be getting distracted from what we need to get done. And that is, quite simply, that we need to continue our march towards electrification.”
Rowan was speaking on the same day his business announced results for the first quarter of 2022.
Revenue grew by 8% to reach 74.3 billion Swedish krona (around $7.56 billion). Earnings before interest and taxes came in at 6 billion krona, compared to 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 have an effect on operations. “Semiconductor constraints continued to gradually improve,” the company said.
“However, due to a temporary shortage of a specific semiconductor, production was down at the end of the first quarter. This shortage is expected to remain in the second quarter.”
Looking ahead, the business said it was expecting “supply chains to improve in the second half of the year.”
—Chloe Taylor contributed to this article.
(With inputs from CNBC)