By Edward Taylor
GENEVA (Reuters) - Tighter emissions rules in Europe will push up the price of diesel-engined cars to the point where plug-in hybrids will become an attractive alternative, Volvo Chief Executive Hakan Samuelsson said on Tuesday.
The average carbon dioxide emissions limit for European carmakers' fleets will need to fall from 130 grammes per kilometer to 95 grammes in 2021, forcing them to invest more in exhaust emissions technology.
"The diesel engine will be more expensive and we need to fulfill the 95 grammes. Then the twin engine is a very attractive alternative," Samuelsson told reporters at the Geneva Motor Show.
Diesel cars account for over 50 percent of all new registrations in Europe, making it by far the world's biggest diesel market. Volvo, owned by China's Geely, sells 90 percent of its XC 90 offroaders in Europe with diesel engines.
The scandal over Volkwagen's cheating of U.S. environmental tests to mask emissions of nitrogen oxide, which can cause or aggravate respiratory disease, means manufacturers are facing intense scrutiny over the pollutants from their cars.
"It will take more equipment and more money to bring down the emissions levels now, and Volvo will introduce cleaner diesels much faster as a result of the Volkswagen issue," Samuelsson said.
Goldman Sachs believes a regulatory crackdown could add 300 euros ($325) per engine to diesel costs that are already some 1,300 euros above their petrol equivalents, as carmakers race to bring real NOx emissions closer to their much lower test-bench scores.
Volvo does not plan to offer a diesel-hybrid version of its XC 90 offroader, preferring a petrol hybrid version instead.
Separately, Samuelsson said Volvo was open to the idea of relying on a third-party technology or software company to develop an operating system for driverless cars.
Right now, it is building this expertise in-house, since many of the reflexes a vehicle has to learn for semi-autonomous driving are related to accident avoidance and safety. But this could change if the right partner emerges.
"We would look in to that. We always have that approach to suppliers. We have not been developing our own transmissions, for example," Samuelsson said, adding that Volvo has talked to a lot of potential partners and "will not rule out anything".
It has for example started working with Nvidia, a chip maker with expertise in computer gaming. "They have never been suppliers to the auto industry. But advanced graphics processors is exactly what we need to calculate what the road is looking like 200 metres ahead," he said.
The Swedish carmaker is more than half-way through an 11 billion euro factory-building and product development plan. It may tap bond markets to raise more funding, Samuelsson said, declining to give further details.
He predicted that 10 percent of Volvos would be electric by 2020, saying the cost and energy density of batteries was nearing a point where such cars can go 500 km (310 miles) without needing to be recharged.
(Reporting by Edward Taylor; Editing by Mark Trevelyan)