Electric shift of Volvo gives Tesla a shot

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The Swedish automaker on Wednesday said it will stop producing new gasoline-only engines from 2019 and move to different hybrid and fully electric models. That may not appear too significant at first – the company accounted for just 0.6 percent of global car sales last year. But its plan summarizes the problems faced by Elon Musk’s firm.

Volvo has no plans yet to drop existing gasoline vehicles. And it will keep the combustion engine in two of the three options it will introduce starting in two years’ time – a plug-in hybrid, which can use either petrol or electricity, and what it calls the mild hybrid, like Toyota's Prius. The industry sells more cars with these engines than pure electric motors.

Barclays noted that Tesla accounts for only 3 percent of electric and hybrid sales. Local players selling cheaper cars dominate, however, the likes of Daimler and General Motors are expanding. This probably will further reduce the cost of batteries, Tesla depriving one of its main advantages. It symbolizes the growing competition which Tesla is facing around the world.

Another blunder was the lack of batteries, which kept production 40% lower than the demand for most of the second quarter, the company said on the eve of the 4th of July.

That and Volvo’s news took over 7% of Tesla shares on Wednesday.