Volvo vows to go fully electric by 2030

Volvo Cars set an ambitious goal to take its cars fully electric by 2030. Anders Gustafsson, President & CEO of Volvo Car USA joins Yahoo Finance Live to break down why the company vows to only sell electric vehicles and the demand for EV cars.

Video Transcript

AKIKO FUJITA: Volvo Cars is looking to an all electric future with its eyes firmly on 2030. A company owned by China's Geely Holdings announcing today that it will phase out any car with an internal combustion engine, including hybrids, in the next nine years. The company's also shifting its entire operations for customer service online. Lets bring in Anders Gustafson. He's the president and CEO of Volvo Cars USA. Anders, it's great to have you on. This is certainly a very aggressive target, far above a lot of the major car makers in terms of the next nine years to go all electric. Walk me through the timeline. Why 2030?

ANDERS GUSTAFSON: It's really following our cycle plan and our priorities in the company. We have decided to put all our efforts into a growing segment, and that is electrification, and also we see a by far higher demand and also we see support for electrification, especially in US.

ZACK GUZMAN: I wonder, too, to me, you know, navigating all this right now, there are a lot of options out there, whether people want to go EV or, you know, combustion engine, but I feel like the decision to put your car sales online also by 2030 is pretty big. Talk to me about where that came from, and how much of that could have stemmed also perhaps from the fact that Tesla has seen such success with that?

ANDERS GUSTAFSON: It's a kind of a combination of first of all, of course, you need to have a plan for this and take it in steps. We started last year with a very aggressive PR strategy focused on the West Coast, where we had the highest demand. And just after six months, we found out that the demand is really in all the three regions we have in US, both the West Coast and the southern region and Northeast. So we see by far higher demand. That was one of the ingredients in being so bold with the numbers.

Then we, of course, today we launch a new car, our second full electric car in the US market, but the most important thing is what the customers are asking for. Just to clarify that we will do this together with our partners in US, but we would take away the unhealthy part of our business, and that is that we normally have by far higher production capacity than we have demand.

And that's the whole change in the structure that we will not sell from a stock that is controlled and owned by our partners. We will take care of that. And then we will work with the online tool to make sure that we have the right products in our stock and also in our production capacity structure. And that is the kind of a golden thing to fix in this industry, to maintain a good value but of course give the service that the customers are asking for, and that is really online.

AKIKO FUJITA: Anders, what does this all mean in terms of employee headcount? Does anything shift as a result of some of these announcements you made today? Number one in the shift that's happening on the production lines to go all electric, as well as shifting to all online.

ANDERS GUSTAFSON: Well, I would say it's different kind of a competencies that we need in the future. We know that, and we started that transformation a couple of years ago. And in the US operation, we were very lucky. We have had 100% growth the last five years, and we are planning for another 100 upcoming years. Just in February, I think the numbers are going to be announced in a couple of minutes. We have a growth of 17% in February and 20% year to date just in US. And that is the base for what we planned for.

Our plant in Charleston is just building a great sedan right now, but the biggest kind of a locomotive in the US, US market is the XC90, and that is going to be produced in Charleston. So we would go for quite low production capacity to highest capacity ever on the US market, and therefore my answer is that we need to recruit more colleagues, more resources, but of course, we need different competencies, and that's the reason we have to have our own university and also the reason why we educate our partners so they can take the next step together with us.

AKIKO FUJITA: When you say you need to recruit more, how significant an increase are we talking about?

ANDERS GUSTAFSON: If we take about in numbers, in Charleston, where we have our plant, we need to double our size of the operation right now. It's really triple the size of the operation. From our headquarter point of view, it's of course, more digital competencies that we need. And then we have the software development on the West Coast, where we find it's a little bit easier to recruit right now.

ZACK GUZMAN: When it comes to, kind of, the reason for going so big on this announcement, to really target 2030, which is a lot quicker than a lot of other traditional manufacturers out there, are you looking at them being the competition here in this game of catch up in the EV space, or are you more trying to do this so you can really take some share away, start to take share away from some of those other EV companies like a Tesla?

ANDERS GUSTAFSON: I think we have learned in life that you need to be focused. It's very, very tough to be, kind of, a number one or be good at two tasks at the same time. So that's the reason why we will leave the development of combustion engines and go for full focus, all our engineers, into electrification.

It's easier to recruit, it's easier to attract than spearhead the talents, because it really fits together. This is a very, very competitive industry. We are a great company. We have great values, and that is the kind of our platform to recruit the best engineers and hopefully some of the digital colleagues, too. So it is going to be a battle, but we are good, and we have a quite good track record, so now it starts.

AKIKO FUJITA: Anders, I wonder if you can speak to the demand in the market. It's been incredible to see the big tide shift over the last year with Europe becoming the largest market for EVs, but that was largely attributed to the government incentives that were much more aggressive. We've sort of seen the same story in China as well. When you talk about going all electric and being able to maintain the demand, can you do it without government incentives in place?

ANDERS GUSTAFSON: I think our normal answer is that we cannot run our operations based on support from governments. I think they should help us with the infrastructure of charging. There we've been very, very clear that we need help, and I think that they will do their part. That is at least my personal reflection after dialogue with them last week. And then we will have our business model. To be competitive, you need to work with efficiency. You need to reduce selling cost, and that's the reason why we are so focused on online, and that's the reason we are so focused on getting closer to the transaction, not to control it, but to plan little bit faster that we can do today.

ZACK GUZMAN: It also seems like it might come with a trade off here, too, until 2030. What kind of calculations went into that in maybe the negative impacts that might come from someone who might be considering Volvo and say, well, if they're going to be shifting to electric, maybe my gas powered car for service might not be top of mind in the interim?

ANDERS GUSTAFSON: Yeah, I would say, we, let's see. We are quite convinced, and it is nine to ten years, and the cycle plan that will benefit US is, of course, a supportive decision to achieve that number for the operation I am responsible for. And I think that we are being very transparent towards our partners. They believe in this strategy, too, even if they are very, very afraid of when we use the word control and so on, and that is not what we aim for. We just like to utilize the information, plan our business, and also make sure that we go away from this push mentality that exists in this lovely industry.

AKIKO FUJITA: And Anders, finally, an issue that every car maker is dealing with right now, the global chip shortage, and you've had to halt some of the output over in Europe as a result of it. What does the pipeline look like for you right now, and how significant are the delays stemming from this?

ANDERS GUSTAFSON: It is quite critical and very strange situation. We have been extremely lucky, and of course, good players to have, so a lot of kudos to the purchase department. We have been able to run the operation in a smooth way. I know, kind of a cars I have on the ships on its way to US is six ships right now with around 10,000 cars, and that is we need more ships quite fast. But right now what I see in our fabulous systems is that it looks good, and we will be able to ramp up the volumes that goes in line with the 17% growth that we had in, in February. So right now, looks good. We monitor it 24/7. I'm a little bit nervous, but right now, it looks good.

ZACK GUZMAN: As long as it looks good. I appreciate you coming on here to chat with us on all those things. Anders Gustafson, president and CEO of Volvo Cars USA. Thanks, again.