Barcelona, March 25, 2019.- The commercial margins of manufacturing combustion cars to electric cars are very different. And manufacturers like Volvo are already warning you in information with these very specific percentages. Volvo expects its margins on electric cars to match those of vehicles with combustion engines by 2025, CEO Hakan Samuelsson said.
Automakers are planning a $300 billion surge in spending on electric vehicle technology over the next five to 10 years but have admitted that higher component costs and limited take-up in initial years will hit margins.
Volvo is investing about 5 percent of its annual revenue, equating to $1 billion a year, in building driverless and electric cars and has promised to bring five full-electric cars to market in the next few years.
It showcased the first, the Polestar 2, less than a month ago, made by its luxury performance subbrand to rival to Tesla’s Model 3. It also plans to launch a Volvo-branded electric compact SUV this year in the company’s push to derive 50 percent of its sales from full-electric cars by 2025.
“It’s very difficult to say if we’re going to have the same margins in 2025 as we had in 2015 … because electric cars are very expensive,” Samuelsson told Reuters on the sidelines of a safety showcase by the company in Gothenburg.
“But I would be absolutely sure we will 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 costs for components such as batteries and declining margins on conventional cars.