Volvo Signs On to COP26 Pledge, Seeing Risk EVs Will Doom Rivals

(Bloomberg) -- Volvo Car AB, one of just a few automakers that signed on to a pledge to phase out fossil fuel vehicles, predicted a bleak future for competitors that snubbed the COP26 climate summit declaration.

The Swedish carmaker joined General Motors Co., Ford Motor Co., Daimler AG and a handful of other manufacturers in agreeing at the COP26 climate summit to work toward selling only zero-emission vehicles globally by 2040. In developed markets, the companies plan to phase out combustion engine cars five years sooner.

Volkswagen AG, BMW AG and Toyota Motor Corp. are among the major automakers missing from the pledge announced in Glasgow. Concerns include the patchy development of charging infrastructure and the reluctance of major governments to join the declaration. The U.S., China, Japan, France and Germany were among nations that didn’t sign on.

Volvo, whose plan to become a pure electric carmaker by 2030 is one of the most ambitious in the industry, said it expects the shift toward electrification to accelerate beyond current projections, and that companies that don’t adapt may fail to survive the transition.

“I don’t think we’re going to see all the same car brands around in 10 years time, only with an electric motor,” Chief Executive Officer Hakan Samuelsson said in an interview. “I really believe that this is an opportunity, something to be embraced, not resisted. So let’s stop the small steps.”

Volvo, which listed in Stockholm last month but remains partially owned by China’s Zhejiang Geely Holding Group, expects more than half of its global sales to be fully electric by 2025, according to its statement. The Swedish company also introduced an internal carbon price of 1,000 kronor ($116) for every ton of carbon emitted across its value chain, a step it said represents a world first.

Samuelsson said that while Volvo priced shares in an initial public offering last month at a discount, the share sale still represented a vote of confidence in the company’s strategy. Without the decision to electrify, he said the carmaker wouldn’t have been able to list at all.

The main brake on Volvo’s expansion is coming from a dearth of production capacity for batteries and electric motors, the CEO said. Roughly 40% of Volvo’s sales in Europe and 60% or more in California this year are plug-in models.

Samuelsson said the cost of electric and combustion-engine cars -- and hence profit margins -- should reach parity around mid decade. While the luxury sector has led the migration to electric propulsion, volume manufacturers that have so far resisted should fall in line, he said.

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