When it comes to new technology, there's always a bump in initial investment costs - whether it's just for the manufacturer or for the early-adopting consumers as well. The most widespread trend in the automotive manufacturing industry has been the move to electrification, and companies across the board and dropping huge amounts of money in order to improve existing factories or build entirely new ones, along with the cost of training or acquiring new personnel to build these new electrified or all-electric vehicles.
As such, the profit margins for electric cars doesn't look very promising - at least in the beginning. Over time as the costs are amortized, the cost per vehicle goes down and profit margins grow. Volvo believes that by 2025, electric vehicle profit margins will match those of the conventional cars, which isn't a very long period of time in the grand scheme of things. Even so, manufacturers are largely forced into this line of progress by tightening emissions and efficiency regulations, especially if they want to do business in Europe.
This statement, made by Volvo CEO Hakan Samuelsson, is a bit of a double-edged prediction. This match in profit margin is achieved through better component costs for electric cars, as well as lower demand and lower profit margins on conventional cars - a tipping scale of sorts. There may be a drop in overall profits among manufacturers over the next few years unless they hike up prices on electric vehicles - and possibly push the cost over to local governments as they want to incentivize the purchasing of electric cars.