Volvo plans to build only electric and hybrid vehicles starting in 2019, making it the first major automaker to abandon cars and SUVs powered solely by the internal combustion engine.
CEO Hakan Samuelsson said the move was dictated by customer demand. It means that in two years, all new Volvo vehicles will have some form of electric propulsion.
The rest of the auto industry is likely to make similar moves in a few years, said Sam Abuelsamid, senior analyst for Navigant Research, with luxury automakers leading the way.
"I think we'll probably see most of the premium brands do the same thing in roughly the same time frame," he said. "More high-volume mainstream brands will be a little slower."
In order to meet government fuel economy requirements worldwide, automakers are developing more hybrid systems that use both gas engines and electric motors. Many are 48-volt "mild hybrids" that assist a gas engine to move a car to make it more efficient, improving gas mileage by 10 or 15 per cent, Abuelsamid said.
Such systems generate enough electricity to allow automakers to move functions such as air conditioners and water and oil pumps to electric power, getting rid of mechanical belts that are a drag on the engine. Those systems can run only when needed, and that can save another 2 or 3 per cent on fuel consumption - so a vehicle that gets 20 mpg could get about another four miles per gallon he said.
European luxury brands such as Audi and Mercedes-Benz already are rolling out mild hybrid systems on cars in Europe. Those systems likely will be coming to the U.S. because it's expensive for the companies to build different cars for different markets, Abuelsamid said. General Motors and others already have such systems as options on some models in the US.
Cars with mild hybrid systems also can accelerate better because both electric and gas systems can be used at the same time when needed.
Fully electric and hybrid vehicle sales have risen a little since 2012 but still accounted for only 2.6 million, or about 3 per cent of worldwide new vehicle sales, last year. Navigant predicts that will increase to around 3.7 million in 2018 and to more than 9 million by 2025. That's about 9 per cent of sales.
Volvo, which is based in Sweden but owned by Chinese firm Geely, will launch five fully electric cars between 2019 and 2021. Three of them will be Volvo models and two will be electrified cars from Polestar, Volvo Cars' performance car arm. It also plans to offer a range of hybrids as options on all models.
Volvo expects to reach its target of selling 1 million electrified cars by 2025, with a range of models, including fully electric vehicles and hybrid cars.
The company said its long range models could travel 500 kilometers (310 miles) on a single charge using current technology, but it is looking for suppliers for new and better batteries.
Samuelsson, who acknowledged that the company had been skeptical about electrification only two years ago, said circumstances have changed. "Things have moved faster; customer demand is increasing. This is an attractive car people want to have," he said.
He's hoping Volvo's announcement will encourage suppliers to invest in battery manufacturing and electric-car chargers.
Last year, Volvo sold 534,332 cars in 100 countries, up more than 6 percent from 2015.
