Volvo’s 2021 production plans safe, top exec says

Europe

Volvo Cars Chief Technology Officer Henrik Green says the Swedish automaker’s plans for next year remain on track, barring any unexpected setbacks caused by the ongoing pandemic. He also outlined Volvo’s battery localization strategy during an interview with Automotive News Europe Managing Editor Douglas A. Bolduc.

Has the pandemic forced Volvo to adjust any of its 2021 plans?
We have made every effort to keep going as strong as possible. Yes, we had some temporary layoffs and people working from home during the worst of the pandemic in Europe, but we have not had to move any of our program timings or change any plans at this point.

How would you rate your supply base? Is it 100 percent back up to normal, 50 percent back up to normal?
We are running production very close to normal, if not normal. I’m seeing very few production disturbances. From that perspective, it looks good right now. Fingers crossed. Now, we still need to assess whether all future supplies that will come into play in 2021 and 2022 are still on track. Our main assumption today is that we will be able to recover much of what we lost during the early part of this year.

The XC40 Recharge is your biggest debut of the year. Was there ever a time you thought you might not get there because of the pandemic?
The pandemic, especially in the beginning, was very concerning for us. The crisis moved to the Western world as we were starting to build the pre-series production version of the car. But because of the clever management by many of my colleagues, both on the personnel side and the production side, we managed to get out all the prototype series cars with just a few weeks’ delay. Therefore, we are able to launch the car pretty much according to plan. If you would dig really deep into the detail I believe we moved the mass production ramp up by about two weeks as a direct result of the pandemic, which to me is a huge success considering all the risks involved.

What is the timeline to have local battery production in the three major markets?
We are building EVs in Europe right now and we get local batteries from LG Chem [which has a plant in Poland]. We will have local batteries in China when we start production. And, as soon as we start producing battery-electric vehicles in America, we will have local battery production there.

What challenges are you still working to overcome?
Battery chemistries are constantly evolving and improving. We want to ride the forefront of that wave. Therefore, I foresee a continuous optimization of our logistic flow based on where there is a new chemistry available. Once available, we will work to get that to as many cars as possible, as fast as possible. There will be a continuous optimization ongoing in search of the most efficient chemistry and most competitive product available. We will want to get that advantages at every location where we produce.

When will you start getting batteries from CATL’s plant in Germany?
That hasn’t been decided yet.

Is there a significant cost saving from sourcing batteries locally?
There is a big benefit from having a local supply of batteries, which are both big and costly and also hazardous to transport due to their chemical set up. Our strategy going forward is to have a local supply of batteries in America, Europe and China. It’s a very strategic choice. When that flow is optimized, it gives you big benefits in terms of cost.

Why?
Shipping batteries is complicated by the pure transport cost, which is not negligible, as well as the duties and tariffs you have to pay. Also, when you import the batteries and then export the cars there are certain rules on how to apply tariffs. It’s quite complicated. Therefore, to get it fully optimized is highly important so that you can provide a good price to the consumer. It’s a really strategic need for us.

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