Volvo plans flagship EV for S.C. as XC40 Recharge unveiled

LOS ANGELES — Volvo Cars will create an electric version of its next XC90 and build it at its plant near Charleston, S.C., in 2022,  CEO Hakan Samuelsson told Automotive News last week. It will be the first electric Volvo to be American made and is expected to be the brand’s third battery-powered model.

Starting as soon as the second quarter of 2022, the plant will become the global production center for the third-generation XC90 flagship crossover. It will be built on the next version of Volvo’s Scalable Product Architecture platform, referred to as SPA2. It’s not clear how much of XC90 production at the $1.1 billion South Carolina plant will be devoted to the battery-electric variant.

“There will be a huge investment necessary for the SPA2 platform,” Samuelsson said.

The current XC90 accounts for about a third of Volvo’s U.S. sales. Through September, Volvo sold 24,909 of the large crossover in the U.S., up 5.3 percent from the year-earlier period.

Volvo’s first battery-powered model, an electric version of the fast-selling XC40 compact crossover, was unveiled here last week. That new EV will arrive in U.S. stores in the fourth quarter of 2020. It will be priced at under $48,000, after the $7,500 federal tax credit, Volvo said.

The XC40 EV, called the XC40 Recharge, will be the vanguard of a series of emissions-free models from Volvo. The automaker wants battery-powered vehicles to account for half of its global sales by 2025. Over the next five years, Volvo said, it will launch a fully electric vehicle every year.

“A Volvo built in 2025 will leave a carbon footprint that is 40 percent lower than a car that we build today,” Samuelsson said at the event. “We made safety part of the brand. We should do the same with sustainability.”

Volvo aims to keep putting 5 to 6 percent of annual revenue back into r&d, and a large portion of that will go toward battery-electric vehicles, especially as Volvo plans to carve out its costly engine-making business and make it a standalone unit with the powertrain operations of parent Zhejiang Geely Holding Group.

Material costs for EVs are about 30 percent higher than for conventional engine models because of expensive lithium ion batteries, power electronics and electric motors.

Samuelsson acknowledged that developing, building and selling EVs will “put pressure on our margins.”

But he said the new EV models will be “profitable from day one,” even though they will not likely have the same per-unit profit margin as fossil fuel-powered vehicles.

Volvo’s electrification ambitions will also require financial commitments from the brand’s 283 U.S. dealers.

“The numbers I’ve heard have been, on the low side, $100,000 to $150,000, and on the higher side, $500,000, per store to get ready for electrification,” said one dealer briefed on Volvo’s plans who asked not to be identified.

Retailers must invest in pricey fast-charging stations and specialized equipment and tools to handle the vehicles’ high-voltage batteries. Each Volvo store will have to install chargers for customer use and in the shop.

“It’s very, very costly to have the fast-speed charging capability,” said Volvo Car USA boss Anders Gustafsson.

Volvo will host Electrification Readiness meetings to brief retailers on its electrification product strategy, network standards and rollout plan.

Some dealers admit they are leery of new investment obligations, having recently spent millions of dollars on store improvements.

“We are selling more cars, we are gaining market share, so we are starting to see some benefits of the investment,” the dealer told Automotive News. “But now we’ve got to go to the drawing board and make a major new investment without knowing what the return is going to be.”

The retailer also questioned the timing of Volvo’s EV push. There is “very little demand” for EVs in the U.S., the dealer said. “This is about global more than U.S.,” he said. “It’s about diesel offsets in Europe and China.”

Gustafsson said Volvo will take a “ZIP code approach” — with dealers in EV-friendly markets upgrading their facilities first. Volvo has hired a company to assess the electrical infrastructure needs at each U.S. store and determine the investment needed in fast chargers based on market demand.

The XC40 Recharge trades the conventional crossover’s four-cylinder engine for a 78-kilowatt-hour battery. The EV, built on Volvo’s Compact Modular Architecture platform, has an estimated EPA range of “more than 200 miles” and can go from 0 to 60 mph in 4.7 seconds, the company said.

Volvo hopes to ride the popularity of the XC40, which has attracted younger buyers to the Volvo brand. It was Volvo’s fastest-growing crossover model in the U.S. in the first nine months — up 46 percent from the prior year, with 13,223 sales.