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Volvo At The Environmentally Friendly Vehicle Conference

11 November 2005

During a speech¹ at The Environmentally Friendly Vehicle Conference² in Birmingham on 11th November, Gerry Keaney, Volvo Car Corporation's senior vice president of sales, marketing and service, stated that:

• The key issue for controlling and reducing CO2 emissions is the need to overcome the many political, economic, social and behavioural barriers – as well as an under-developed infrastructure and low demand.
• Volvo Cars believes that the introduction of the European Biofuel directive is essential in order to introduce alternative fuels on a wider scale and welcomes the Renewable Transport Fuels Obligation in the UK announced by Alistair Darling at the EFV conference yesterday.
• Incentives and tax deductions are necessary to kick start the market for low emissions vehicles – eg. Sweden offers up to a 40 per cent tax deduction on company cars powered by alternative fuels and powertrains.
• A co-ordinated approach by all stakeholders is essential to make environmentally friendly cars successful – eg, 'Biogas Cities' project in Sweden.
• Volvo has had a range of Bi-Fuel cars for 10 years, but lack of co-operation and infrastructure has made market growth a constant uphill struggle.
• Only one percent of Volvo Bi-Fuel customers claim the environment as their main reason for buying, while more than 85 per cent base their choice on economy (fuel costs).
• To boost the demand for alternative fuels environmental cars must be cool and desirable to consumers – eg, Volvo's 3CC sustainable mobility concept car.

Copy of speech given by Gerry Keaney, Senior Vice President Marketing, Sales and Service, Volvo Car Corporation at the Environmentally Friendly Vehicle Conference in Birmingham on 11th November 2005.

It is a pleasure to be here today to discuss one of Volvo’s most focused issues - environmentally friendlier vehicles.

Caring for the environment has been part of Volvo’s heart and soul for many years.

Introducing the three-way catalytic converter, a world first in 1976, is Volvo's finest hour when it comes to make motoring cleaner.

Volvo has been first with several groundbreaking technologies since then, and our plans to achieve a significant volume boost in the future include a growing number of cars powered by alternative fuels and powertrains.

As a car manufacturer we have accepted the responsibility to develop and build cleaner cars.

But to reach for a cleaner society we must work together with others.

Over 30 years ago Volvo made the following statement at the United Nations Conference on the Human Environment in Stockholm:

"Volvo cannot solve the environmental problems associated with motor vehicles on its own. It is society that bears the main responsibility for developing our transport systems. But Volvo will accept its share of that responsibility by contributing technical solutions".

That statement is still valid, and we have worked hard on our commitment over the years.

At the moment, we can offer Volvo buyers Bi-Fuel cars¹ that can run on methane² gas - either natural gas (CNG) or bio methane - and FlexiFuel³ cars for renewable bio ethanol.

We are working on other solutions, like hybrids, as well, both at Volvo Cars and within Ford Motor Company.

But - and this is my core message to all of you - solving the CO2 issue and introducing alternative fuels is not just a technical problem.

The real problem of controlling CO2 emissions is to overcome the many political, economic, social and behavioural barriers!

First of all, we must find a way to make cleaner cars an attractive choice for the customers.

Our methane-powered Bi-Fuel cars have been on the market for ten years and are excellent examples of how a mature and efficient technology has been struggling uphill due to lack of cooperation and infrastructure.

To make environmental cars successful, all of us must learn to listen to other players, and we have to co-operate.

I can assure you that Volvo is determined to be part of the solution, if we only know for certain which that solution is.

We have several challenges.

Firstly, there are a lot of alternatives when it comes to alternative fuels and powertrains

And secondly, in our top four markets there are four different priorities when it comes to the favoured alternative to petrol.

Our efforts to develop a market for the Bi-Fuel cars show that the diverse playing field creates a number of obstacles from Volvo’s point of view:

• Different priorities on different markets make our product planning, when it comes to alternative fuels and powertrains, difficult.
• Different incentives coming and going make the customers reluctant to invest in environmental technology with an uncertain future.

On top of this, we have the under-developed infrastructure - and the lack of demand from the customers.

In short, co-ordinated priorities are a must to make the alternatives successful in a market where the customers decisions originate in their wallets rather than in their hearts and minds.

It is a fact that only one per cent of all of our customers have consideration for the environment as their number one reason for buying, while more than 85 per cent of our Bi-Fuel customers base their choice on the economy.

Our mutual challenge here today is to initiate actions that turn this rather gloomy picture into a bright one.

So what should we do?

Let’s start with a look at policies that have already worked well - and not so well.

Volvo’s home country, Sweden, is an example of both sides of the environmental coin.

Compared to other countries in Europe⁴, Sweden has an outstanding demand for environmental cars. Next year, 10 percent of the total new car market will be bio-ethanol or methane powered cars, and 16 percent of all new Volvos sold in Sweden next year will be a FlexiFuel or Bi Fuel.

This success is based on a number of coordinated efforts. A few examples:

• Up to 40 percent tax deduction on company cars powered by alternative fuels and power trains
• Incentives on renewable fuels…and reduced vehicle tax for bio-fuelled vehicles is scheduled to be implemented next year
• Dedicated zones for environmental taxis
• Free parking… …and no congestion charges

Volvo’s hometown of Gothenburg is an excellent example of how this type of co-operation on a local level can be very effective.

Each of these stake holders - gas supplier, vehicle manufacturer and the city authorities - has injected valuable components into the system…which is a key to the success.

In fact, the project - called Biogas Cities⁵ - has been an international success and has generated a large amount of interest from other countries.
 
Several large cities in Europe – London, Zurich and Lyon - are interested to follow suit. We have also had visitors from Canadian cities.

In Sweden, the government also supports investments in renewable technologies, and at least 25 percent of all cars purchased by the central and local authorities in 2005 must meet the definition for environmentally sound vehicles.

Next year, the target is to achieve 35 percent.

Less positive in Sweden has been the political drive to force the filling stations to offer an alternative fuel.

To us, that is the wrong way to proceed.

Narrow and forcing legislation – no!

Support and stimulation – yes!

We are convinced that incentives and tax deductions are necessary to kick-start the market.

In the long run, however, the market for alternative fuels must be able to carry its own weight…and we are convinced that this is possible through a cooperative approach by all players.

Volvo’s main challenge is to develop no-compromise cars running on alternative fuels without giving up any other virtues such as safety, performance, quality, range…and of course great looks!

To boost the demand for alternative fuels we also have to make the environmental cars cool from a customer’s perspective.

It’s about adding emotional value to people’s lives by offering environmentally compatible cars that appeal to all the senses, and which people really want to drive.

Our recent concept car, the Volvo 3CC, is an excellent example of how this could work in the near future - and it has won several awards.

It is exciting and versatile in a sporty, cool package with an electric motor and a highly innovative safety concept safeguarding Volvo’s core values.

The engine bay can also be used for other alternatives, such as petrol, diesel, biogas or hybrid combinations, depending on where the future takes us.

It is also our responsibility to provide customers with user-friendly information on our cars environmental impact.

Our Environmental Product Information (EPI) is already available on the Internet⁶, and it is being constantly updated and developed.

Fuel suppliers can join the quest for a growing number of environmentally sound cars by extending their offer when it comes to alternative fuels. Easy access to fuel is a no-compromise demand from the customers.

The authorities…well, I have already touched upon several issues that have to be initiated, with a focus on incentives, taxation and consistent, long-term policy-making both regarding infrastructure and vehicles.

But, also very important, is an international rather than national approach.

A stronger driving force in the European Union would definitely increase the momentum in the quest for cleaner traffic. Volvo Cars believes that the introduction of the European Biofuel directive is essential in order to introduce alternative fuels on a wider scale and welcomes the Renewable Transport Fuels Obligation in the UK announced by Alistair Darling at the EFV conference yesterday.

In short, the search for clean sustainable transport includes one big question:

Can we finally coordinate all the stakeholders?

I think the answer can be "yes" if we can create wider and stronger partnerships, realistic targets, and the right support for an emerging market.

1. Volvo offers the choice of two Bi-Fuel CNG cars in the UK – its V70 estate and S60 saloon. The alternative gas fuel system is an integral part of the car's design, with all controls fully integrated into the dashboard and gas tanks discreetly stored under the car instead of taking up any loadspace - unlike many conversions. In addition, Volvo Bi-Fuel models have been fully crash tested, are built on the same production lines to the same quality and safety standards as other Volvo models, and are sold with Volvo Car UK's standard three year warranty. Full details available from www.volvocars.co.uk.

Volvo's UK Bi-Fuel car range:

Model	CO2 (g/km)	MPG (combined cycle)	£ (on the road)
S60 Bi-Fuel (CNG) 2.4-litre, 5-cylinder	159 CNG / 208 petrol	31.7 CNG 32.5 petrol	S:   £22,208 SE: £24,708
V70 Bi-Fuel (CNG) 2.4-litre, 5-cylinder	169 CNG / 215 petrol	30.1 CNG 31.4 petrol	S:   £25,708 SE: £28,208

2. Methane, the gas used in Volvo Bi-Fuel cars, can be obtained from two sources:
Natural Gas (or CNG - Compressed Natural Gas) - is a fossil fuel sourced from reserves deep under the Earth's surface. It has lower CO2 emissions compared to petrol/diesel.
Bio-methane is a sustainable (renewable) fuel formed from Bio mass (waste, sludge etc) and has almost 100 per cent lower net CO2 emissions.

3. In Sweden, Volvo offers a range of FlexiFuel cars that run on bio-ethanol.

4. Sweden has a superior infrastructure for CNG, methane refuelling, with over 60 outlets already and another 25 planned. By comparison, there are still only around 15 CNG refuelling stations accessible to the public in the UK. Germany is another example of a growing market for alternative fuels helped by government fiscal policies.  The CNG refuelling infrastructure is expanding rapidly, with over 650 stations already offering CNG which is expected to rise to 1,000 by 2007. The German government has provided confidence and stability for the industry and consumers by fixing the fuel duty on CNG until 2020. As a result, there has been long term confidence to invest in gas infrastructure and an increasing demand for gas powered vehicles, with over 27,000 vehicles powered by CNG estimated to have been sold. Plus, Germany's gas industry has been confident enough to encourage gas-powered vehicles by providing financial subsidies and promotions to CNG car buyers, while some insurance companies also offer special environmental discounts on premiums.

5. In Sweden, local authorities have demonstrated how it is possible to work together with industry to promote use of sustainable alternative fuels via a successful joint 'Biogas Cities' project between the City of Gothenburg, the Västra Götaland Regional Authority and Volvo. All the project partners have contributed to making the use of gas in vehicles advantageous, such as free parking for gas-powered cars and incentives to environmental taxis. This has created a market for gas, including a network of 19 gas-filling stations and 3,000 cars and 115 buses powered by the fuel. Further details available at: www.volvocars.com/citizenship.

6. Volvo's Environmental Product Information is available at:  www.volvocars.com/epi

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