Volvo Cars Battles Parts Scarcity in Electrification Push

(Bloomberg) --

Volvo Cars is hoping battery deals with Asian suppliers will help it overcome hurdles in an ambitious electrification strategy that’s struggling with a shortage of components.

Production has been constrained by a dearth of inverters, batteries, chargers and other equipment that go into hybrid cars, Chief Executive Officer Hakan Samuelsson said in an interview in London.

About 10% of Volvo’s vehicle sales are made up of hybrids, likely the highest in the industry, according to the CEO. In 2017, the Zhejiang Geely Holding Group Co.-owned carmaker declared “the end of the solely combustion engine-powered car” and announced every new model launched from 2019 would have an electric motor.

Larger Rivals

Volvo is pitted against larger rivals such as Volkswagen AG and BMW AG in the race to secure supply of components for electric vehicles. Earlier Wednesday, the company announced a long-term deal with China’s Contemporary Amperex Technology Co. and South Korea’s LG Chem Ltd. for batteries that will be used in Volvo and Polestar-branded models over the coming decade.

Volvo Cars Battles Parts Scarcity in Electrification Push

“We are not alone in going electric, so of course this is the main thing with the deal -- we need to secure the supply,” Samuelsson said.

Volvo plans to unveil its first all-electric car, a version of the XC40 sport utility vehicle, in the second half of this year, and production should start in 2020, Samuelsson said. The plug-in hybrid version of the XC40, originally scheduled for last year, has been delayed to 2019.

“We have a very high demand for hybrids right now,” he said. “Within a year or so we should have capacity for around a quarter of our cars.”

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