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Business

Electric era to dawn at Volvo in 2019

Environmental rules, consumer needs fuel a shift away from gasoline

FRANKFURT -- All Volvo car models launched from 2019 onward will be electric or hybrid, the Swedish automaker said Wednesday, pledging to phase out combustion engines in response to stricter environmental regulations and consumer demand.

"This announcement marks the end of the solely combustion engine-powered car," CEO Hakan Samuelsson said in a statement. Volvo, owned by China's Geely Automobile Holdings, became the first major automaker to announce an immediate exit from gasoline-powered cars.

At a press conference that day, Samuelsson emphasized the significance of the decision, calling it a "strategic change in the future of our development."

Volvo plans to sell a total of 1 million electric vehicles worldwide by 2025 -- nearly double the 530,000 cars of all types it sold in 2016. Five all-electric models will debut between 2019 and 2021.

The company is building a lineup of fully electric vehicles, plug-in hybrids and mild hybrids. They will be priced like luxury vehicles but will remain competitive with diesels.

"People increasingly demand electrified cars and we want to respond to our customers' current and future needs," Samuelsson said in the statement.

In the shadow of Volvo's announcement stands electric-vehicle specialist Tesla, whose German sales have shot up about 140% for the first half. The U.S. company begins deliveries of its affordable Model 3 late this month.

Volvo, for its part, recently announced that it would spin off performance car arm Polestar into an electric-vehicle brand. Two of the five new models due out by 2021 will be from Polestar.

Advances in battery technology have increased electric cars' range, gradually clearing away the biggest obstacle to greater popularity. Cost of ownership in Europe will be the same as for diesels by next year, Switzerland's UBS estimates. Although such issues as a lack of charging stations persist, the conditions for the spread of electric vehicles are ripening faster than the industry expected just a few years ago.

Volvo is also targeting China, which is the world's largest electric-vehicle market. Spinning off commercial-vehicle operations, the company was acquired by Ford Motor and later by Geely in 2010. China will soon introduce new electric-vehicle regulations that are likely to drive further market expansion. By teaming up with its Chinese parent company, Volvo hopes to cultivate sales there.

Top three German automakers Volkswagen, Daimler and BMW plan to increase electric vehicles and hybrids to as much as 25% of total sales by 2025. But a quick shift will not be easy for German automakers now reliant on diesel offerings as it could affect employment at factories for engines and related parts.

Nikkei assistant journalist Kyra Jaeger in Frankfurt contributed to this report.

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