Volvo Goes Electric: Is This the Beginning of the End for Gas-Powered Cars?

Volvo just became the first big carmaker to go all electric. If followed by other auto giants, even partially, that could have big implications down the road for climate change policy, oil demand, and the geopolitics of energy.

Volvo said Wednesday that it will phase out models that only have gasoline-powered engines, the kind that have powered most passenger cars since the Swedish-based carmaker got into business in 1927. Instead, starting in 2019, each Volvo will be either a hybrid — combining an electric motor with a small gasoline engine — or a pure electric vehicle.  

And they won’t all be the safe-but-boring sleds that have come to characterize Volvo over the years: It will also make high-performance electric cars to compete with those of Tesla under the brand Polestar. It is the first big automaker to swear off pure gasoline- or diesel-powered engines.

“People increasingly demand electrified cars,” said Volvo president and CEO Hakan Samuelsson. “This announcement marks the end of the solely combustion engine-powered car.”

For a carmaker in Europe, a move toward electric vehicles makes sense beyond just meeting customer demand. Tough EU rules on tailpipe carbon emissions meant to curb greenhouse gases have forced automakers to scramble to make cleaner engines in recent years. Diesels seemed the answer, until Volkswagen’s “Dieselgate” scandal cast a sooty black cloud over that drivetrain’s future.

As a result, momentum has been building for hybrid and all-electric cars, which have much lower or even zero emissions — and thanks to cheaper battery prices are becoming more cost-competitive.

Not at all coincidentally, Volvo since 2010 has been owned by China’s Zhejiang Geely Holding. To judge by official numbers, which could be fudged upward, China is by far the world’s biggest market for hybrid and electric vehicles, with about 350,000 sold last year, surpassing the 220,000 sold in Europe and the paltry 159,000 sold in the United States.

China’s electric-car visions are much more ambitious than anything in the United States or Europe. Deadly air pollution, caused both by coal-fired power plants and by tailpipe emissions, has put a premium on cleaner vehicles. That’s why Beijing is underwriting electric cars with tax breaks, subsidies, and a host of infrastructure like charging stations.

There are other considerations for China, too. It vies with the United States as the biggest oil importer in the world — and those oil imports create strategic vulnerabilities, like making the country susceptible to a blockade at times of conflict. Building more hybrid and electric vehicles in the world’s biggest auto market makes sense from a strategic point of view, even without worrying about pollution.

But the shift away from oil to electrons as the fuel for cars also promises to slowly rewrite the geopolitics of the global energy trade, researchers at Harvard University’s Belfer Center and Columbia University’s Center on Global Energy Policy recently noted in a report.

More electric vehicles — and they still represent just a fraction of existing fleets — could eventually reduce demand for oil from places like Russia and the Middle East. That could redouble the fiscal pressure those petrostates have already suffered due to years of low crude prices — either sparking internal conflict, in the worst case scenario, or driving economic reform, as seems to be happening in Saudi Arabia and some Gulf states.

The flip side is the possible emergence of a new breed of energy power brokers who control the key raw ingredients for the electric future. China is one of the world’s biggest producers of lithium, the key component in batteries used to power EVs. It’s also the biggest producer of indium, also an important battery component.

Granted, expectations that the renewable energy future would slay OPEC and grant outsized power to a whole new crop of countries are nothing new. Almost a decade ago, expectations were that Bolivia could turn its lithium-rich salt flats into a clean-energy bonanza, but it hasn’t happened. And other countries, including Argentina, Chile, and Australia are also big lithium producers, making it unlikely Beijing could ever corner the market.

Still, the world today revolves around the same quest for crude oil that motivated Big Oil slugfests and international showdowns more than a century ago from boardrooms in New Jersey to the derricks of Baku. Volvo’s announcement, like a high-torque electric motor, could simply accelerate its dismantling.

Photo credit: JONAS EKSTROMER/AFP/Getty Images