The Pandemic Won’t Slow Down Volvo’s Electric Transformation
Also today on Speed Lines: Volvo goes full steam ahead on electrification while Ford retools.
Good morning and welcome back to Speed Lines, The Drive's morning roundup of what matters most in the world of transportation. I am pleased to report that not all of our news today is about the coronavirus. Only some of it. Isn't the news fun, kids?
No Slowdown For Volvo On Electrification
Here's something I think about a lot: the future of the auto industry is very clearly an electrified one, primarily made of hybrid and fully electric vehicles. Transitioning toward that will be deeply expensive for every automaker. So how do car companies finance that shift now that the global economy is, to use technical terms, completely in the toilet? Do they let up, push the changes off and double-down on what little trucks and SUVs people are buying in the meantime?
If you're Volvo, at least, that won't be the case. Despite profits getting hammered across the board, R&D budgets getting slashed everywhere and a very unclear path to recovery, the Swedish automaker isn't letting up. It wants to put one million electrified cars on the road by 2025. Here's a good read from Wired:
Even as other carmakers grapple with the outlook for their electrification plans, Volvo is keeping the pedal to the metal. The Swedish maker is arguably the legacy brand most committed to an electric future and continues to declare that its entire lineup will be either electric or hybridized by 2025. Given Volvo’s relatively small size—and lacking the established momentum of the all-electric Tesla—that’s a precarious commitment.
But not from Volvo’s perspective. “No, we will not compromise on our electrification strategy,” Mårten Levenstam, the company’s head of strategy, told me earlier this month. “Electrification is Volvo’s path forward, and we will continue our plans to electrify our product range.”
The company last year unveiled its first dedicated EV, the forthcoming XC40 Recharge, and hybrid and plug-in options are available for most models in its lineup. Polestar, Volvo's upscale spinoff brand, is on the verge of releasing its sporty all-electric sedan.
Levenstam foresees no changes in Volvo’s overall EV strategy or its timeline, including plans for additional electrified options. “Due to the spread of coronavirus, we see that a weakening market and production disruptions will impact our first-half results negatively,” he says. “However, we continue to invest in new technologies and products to safeguard our long-term future.”
I'd actually argue Volkswagen is "the legacy brand most committed to an electric future" given the cost and scale of its transition. But as far as smaller brands go, yes, Volvo is one of the more aggressive automakers pivoting to EVs.
For one thing, Volvo can't afford to let up, as that story notes—not just because of emissions standards, but also because battery technology is evolving at a very fast rate. This requires years of testing and evaluation, so it has to integrate that tech into its fleet now to grow with it. Worth a read in full.
China's Looming Parts Shortage
The big news this morning is that China is experiencing its first economic contraction since the end of the Cultural Revolution, and experts predict a slower recovery from that than many investors were hoping for. It's also a bad sign for the U.S. even as stocks here are starting to rally—the virus "leveling off" in China, if you believe their numbers, hasn't yet translated to a quick rebound.
On the car side of things, that's especially bad news because automakers and suppliers have put their eggs pretty heavily in the China basket in recent decades. A slowdown in China has already impacted parts supplies to factories across the world, but the reverse is now true too: the country's auto sector is facing a downturn in imported parts as well.
Here's Bloomberg on that:
The virus is now causing production disruptions in Europe, North America and Japan, which supply crucial components to automakers in China, the industry’s biggest market. Those at risk range from global automakers such as Tesla Inc. and BMW Group to local producers including Guangzhou Automobile Group Co. and Zhejiang Geely Holding Group Co., all of whom could face disruptions if the pandemic drags on.
Those fears are a reminder that economic activity in any given country is unlikely to return to normal until the outbreak is brought under control worldwide. With auto-making suspended in Europe and the Americas, glitches in China could affect the only major manufacturing region where plants are ramping up, threatening to set back the recovery of the world’s second-largest economy from a months-long paralysis.
“About two months ago, people were asking how the disruption in Chinese supply chain would impact the global auto industry,” said Stephen Dyer, Managing Director of consultancy AlixPartners. “Now it’s the reverse.”
All of this speaks to the interconnectedness of the modern auto industry. When one major manufacturing sector goes down, we all feel it.
Big Data Is Part Of Ford's Turnaround
Finally, as we've reported throughout the year, Ford, in particular, is going into this pandemic in an especially precarious position. Last year was a financial disaster for the automaker and, early on in 2020, some changes were made at the top ranks to try and reverse course. Now things are harder than ever with the coronavirus outbreak.
Jim Farley is the big Chief Operating Officer now. As The Detroit News reports, focusing on data is a big part of the turnaround:
The innovations coming from that expertise, often honed during tours in Israeli intelligence, are largely being exported to foreign countries and industries.The move also highlights a growing reality of Auto 2.0: data can be lucrative. Autonomous vehicles have the ability to extract massive amounts of data from their users and their surroundings, spawning partnerships between automakers, Silicon Valley powerhouses and even tech startups.
"The real engine in our business is moving quickly from petrol and fossil fuels to data," Farley said. "Our commercial business is a powerhouse. And we have the opportunity to go from selling these powerhouse products, to building a whole digital business of services and data that these customers are ready for."
In practice, that might mean generating data that makes it easier for emergency medical workers or electricians and plumbers to do their jobs or service their work vehicles to avoid costly down time.
"If you're a police officer, or you're in one of our ambulances, the data is life or death. For us, that's an opportunity, but it requires professionals like (Gur Arie) ... He knows how to use data and (artificial intelligence) for life and death situations."
If you find that unsettling, it means you are still sane. But with extensive contact tracking being one solution to beating the coronavirus, we may find ourselves firmly in the era of Big Data whether we like it or not.
China’s GDP Warning to the West (Wall Street Journal)
Read These To Seem Smart And Interesting
Carnival Executives Knew They Had a Virus Problem, But Kept the Party Going (Bloomberg Businessweek)
Can We Shoot the TV Doctors Into Space Already? (MEL Magazine)
Does the Big Data revolution scare you?