The new CEO and president of Volvo Cars has predicted that shortage of battery provide will grow to be a urgent challenge for his sector, telling CNBC the agency has made investments that might assist it achieve a foothold out there.

“Recently, we made a reasonably substantial investment with Northvolt, so that we are in control of our own battery supply as we go forward,” Jim Rowan, who joined the enterprise final month, instructed CNBC’s “Squawk Box Europe” Thursday.

In March 2021, Volvo Cars stated it deliberate to grow to be a “fully electric car company” by the yr 2030, a transfer which would require it to have a constant and safe provide of batteries for its autos.

“I think battery supply is going to be one of the things that comes into scarce supply in the years to come,” Rowan stated.

“And that’s one of the reasons we made that substantial investment with Northvolt: So that we can be in control not just of the supply, but we can actually start to develop our own battery chemistry and production facilities.”

This would allow Volvo Cars to be “in complete control of that electrical propulsion engine for the future,” he stated.

Gigafactory plans

In February, Volvo Cars and battery maker Northvolt stated they’d construct a battery manufacturing plant in Gothenburg, Sweden, with development set to start in 2023. According to the businesses, the ability is about to “have a potential annual cell production capacity of up to 50 gigawatt hours.”

This would equate to supplying sufficient batteries for round 500,000 vehicles yearly, they stated. The corporations’ plans to develop a gigafactory had been beforehand introduced, though a particular location was not confirmed on the time.

As the variety of electrical autos on our roads will increase, battery provide will grow to be an more and more vital — and aggressive — cog within the automotive sector.

Speaking to CNBC’s Annette Weisbach final yr, Volkswagen CEO Herbert Diess highlighted simply how vital battery manufacturing can be within the years forward, noting that challenges did exist.

“Batteries might be, let’s say, a continuous constraint for the growth of EVs over the next five to 10 years,” he stated.

“Because the lead times are huge. We need so much energy and cell production … [There is a] huge supply chain which has to be set up within the next years, and that will, that might, lead to some constraints.”

More not too long ago, this month noticed Elon Musk spotlight the significance of lithium, a key a part of the batteries utilized in electrical autos. On April 8, the Tesla CEO tweeted that lithium’s price had “gone to insane levels!”

“Tesla might actually have to get into the mining & refining directly at scale, unless costs improve,” Musk stated. “There is no shortage of the element itself, as lithium is almost everywhere on Earth, but pace of extraction/refinement is slow.”

Volvo’s electrification plans put it in direct competitors with long-established automakers like Volkswagen, GM and Ford, in addition to Tesla. Just this week, Ford CEO Jim Farley stated his enterprise deliberate to “challenge Tesla and all comers to become the top EV maker in the world.”

During his interview with CNBC, Volvo Cars’ Rowan was requested if there was a hope Musk’s takeover of Twitter would show to be a distraction for the Tesla CEO.

“I have no idea,” he replied. “I know one thing … I will not be getting distracted from what we need to get done. And that is, quite simply, that we need to continue our march towards electrification.”

Rowan was talking on the identical day his enterprise introduced outcomes for the primary quarter of 2022.

Revenue grew by 8% to achieve 74.3 billion Swedish krona (round $7.56 billion). Earnings earlier than curiosity and taxes got here in at 6 billion krona, in comparison with 8.4 billion within the first quarter of 2021.

The firm bought 148,295 vehicles within the first quarter, which it stated was a 20% drop in comparison with the identical interval final yr.

As with many companies, provide chain points proceed to impact operations. “Semiconductor constraints continued to gradually improve,” the corporate stated.

“However, due to a temporary shortage of a specific semiconductor, production was down at the end of the first quarter. This shortage is expected to remain in the second quarter.”

Looking forward, the enterprise stated it was anticipating “supply chains to improve in the second half of the year.”

—Chloe Taylor contributed to this text.