Yesterday, Volvo launched its new XC40 Recharge, a battery electric variant of its compact crossover.

The new model will be offering similar features to the Polestar 2 battery electric saloon, which include:

• CMA (Common Modular Architecture) platform;
• 78 kWh battery pack to enable 400 km (248 miles) of driving range;
• Two electric motors generating a total output of 408 PS (300 kW);
• Android operating system powering the infotainment system;
• Pilot Assist suite of autonomous driving applications; and 
• A voice command system.

However, the talking point of yesterday’s launch is the ambitious environmental goals Volvo has set for itself and the strategy to meet these goals.
 

Acting Now To Be Climate Neutral By 2040 - Source: Volvo Cars

Volvo is to reduce its carbon footprint from 53.0 to 31.8 metric tons per vehicle, by 40 percent, by 2025 and aims to be carbon neutral by 2040. 
• This is more ambitious than the Volkswagen Group, which has announced a 30 percent reduction in its 2015 carbon footprint by 2025 and is aiming to be carbon neutral by 2050.
• Daimler is aiming to be carbon neutral by 2039.

In 2018, the carbon footprint in Volvo’s development, sales, logistics and production operations was only 5 percent of the total.  By 2025, Volvo aims to lower the carbon footprint of its operations by 25 percent.
• Already, many OEMs have already made investments in raising their use of renewable energy, such as at the BMW assembly plant in Leipzig, Germany, being carbon neutral.  
• The Volkswagen Group is also aiming to lower carbon dioxide emissions of its production facilities by 50 percent by 2025 (against 2010 levels).
• BMW is also designing parts that will last longer than before, reducing the carbon needed to produce spare parts – this will prove challenging to suppliers and will also reduce sales revenues for dealers.

Much of Volvo’s carbon footprint was in the tailpipe emissions of its new vehicles, at 59 percent.  With the powertrain strategies in place, it is likely to make much of the reduction in its carbon footprint by reducing these emissions.  
• Volvo is to eliminate non-electrified vehicle offerings this year.  Its own combustion engine development unit will be separated and be merged with that of the Geely Group, so that Volvo can fully-concentrate its efforts in electrification.
• Volvo is aiming to achieve 20 percent of its vehicle sales as plug-in hybrid models by the end of 2020, rising to 25 percent in 2021.  Apart from some battery electric vehicles, the remainder will be made up of mild hybrid (48 Volt) variants in the near-to-midterm.
• Volvo is aiming to achieve 50 percent of its vehicle sales as battery electric models by 2025.
• Use of common vehicle platforms and components will facilitate this increase in electrification, generating the necessary economies of scale and so making it easier for Volvo to lower the carbon emissions in its new vehicle tailpipes by 50 percent by 2025.  
  o Volvo is also encouraging its customers to use electric drive in their plug-in hybrids.  With this announcement is the offer of a year’s free electricity through a cash refund, monitoring the consumer’s charging from a smartphone app.  Many OEMs are now entering the energy sector to ensure that their customers are charging their vehicles with renewable energy.
  o Over-The-Air software updates will enable constant improvement and potential to reduce the carbon footprint, by enhancing efficiency in the powertrain of new vehicles and by providing data in the development of future models.
  o As well as optimisation, other enabling technologies include wide band gap power switching devices that will enable small form factor and greater efficiency in power electronics - see the Strategy Analytics report HEV-EV Semiconductor Technology Outlook: What Role will SiC and GaN Play?

However, the challenge is in the reduction of the carbon footprint of Volvo’s supply chain, at 36 percent.
• By 2025, Volvo aims to lower the emission of carbon dioxide in its supply chain by 25 percent.  Upon reaching its goals, the supply chain element in the 2025 carbon footprint will increase to 45 percent (with tailpipe emissions lowering from 59 to 49 percent and operations rising slightly from 5 to 6 percent).
• Much of the carbon footprint in the supply chain mainly comes from battery production, as well as the production of components made from metals and plastics.  
  o According to Ricardo, a battery electric car emits an equivalent of 8.8 tons of carbon dioxide before it leaves the assembly line, compared to 5.6 tons for a similar-sized combustion engine car.  
  o Steel in the body and chassis of the combustion engine car makes-up three-quarters of the carbon footprint, equivalent to 4.2 tons, and is unavoidable for suppliers – and approximately 4.6 tons in an EV’s carbon footprint could be coming from the production of batteries and other powertrain components.
• Volvo is working in collaboration with its suppliers to reduce waste, use renewable energy and standardise their production processes.  In battery cell production, a supplier is using cobalt recycled from the consumer electronics sector.  
  o By using carbon neutral sourced battery cells, Daimler is reducing the carbon footprint of its new vehicles by 30 percent.  
• However, monitoring the operations of its suppliers and validating them will be challenging and may lead to consolidation in the supply chain to effectively manage the OEM’s carbon footprint.  
  o Current suppliers to Volvo include CATL (battery cells), Delphi Technologies (power electronics), Lear (battery monitoring, on-board chargers), LG Chem (battery cells) and Valeo (electric motors).

Should Volvo’s ambitious goals be transferred to all OEMs, there is the potential to lower all CO2 emissions by around 10 percent (assuming a 50 percent reduction from the CO2 emission of light vehicles that amount to 22 percent of all emissions, according to a 2019 European Union report).
• However, as transport emissions have increased by 25 percent in Europe between 1990 and 2016, the reduction goals by Volvo and other OEMs could be offset by rising (mainly) combustion engine demand in emerging market regions.
• Greater legislative action is needed beyond the automotive sector and in certain market regions, as well as for automotive to consider Mobility-as-a-Service (MaaS) concepts, to realise greater reductions in carbon emissions. 

Kevin Mak is a Principal Analyst in the Global Automotive Practice at Strategy Analytics.  

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