Green mobility: Sweden’s approach to sustainable automotive development
Abstract: Sweden is a leader in green mobility. Its automotive industry pursues practices of environmental sustainability through electrification, the use of renewable energy, and the application of circular economy principles. Intending to achieve net-zero emissions by 2050, Sweden has put in place a strong policy framework that supports low-carbon transport options. Volvo Cars, Scania, Polestar, and battery innovator Northvolt are leading Sweden’s transition to green mobility. Renewable energy-powered production processes and battery recycling schemes contribute to reducing the carbon footprint of the Swedish automotive industry. This case explores Sweden’s transition to green mobility and addresses its automotive industry’s future challenges.
Keywords: green mobility, environmental sustainability, automotive industry, Sweden, electric vehicles
Authors:
Syeda Tanzina Shadat, corresponding author, International Business Management student, Jamk University of Applied Sciences, School of Business, Rajakatu 35, 40200, Jyväskylä, Finland, tanzina.shadat (at) gmail.com
Murat Akpinar, Jamk University of Applied Sciences, School of Business, Rajakatu 35, 40200, Jyväskylä, Finland
On a cold January morning in 2025, Ola Källenius, the President of the European Automobile Manufacturers’ Association and Chief Executive Officer of Mercedes-Benz Group, addressed European Union (EU) officials through an open letter. He stated: “We must face the reality. The future of Europe’s automotive industry is uncertain in meeting the Green Deal’s stringent greenhouse gas reduction targets due to rising costs” [1].
Sweden is located in northern Europe and has a population of 10.6 million people. Its capital is Stockholm, and its neighbours are Norway in the west and the north, Finland in the northeast, Denmark in the southwest, and the Baltic Sea in the east and the south (see Exhibit 1). Despite its harsh winters, a small domestic market, and high labour costs, Sweden has extensive wind and hydropower capabilities and a research-driven innovation ecosystem [2]. Government incentives and legislation support environmental sustainability [3,4]. The nation’s dedication to combating climate change is evident in its plans to transition to a fossil fuel-free transportation system and reach net-zero emissions by 2050 [5,6]. Electrification of vehicles is a fundamental aspect of this transition, pioneered by Volvo Cars, Scania, Polestar, and Northvolt. However, there are challenges ahead, such as battery supply chain vulnerabilities. How could the Swedish automotive industry tackle its challenges and become a role model in achieving greenhouse gas reduction targets?
Trends in the global automotive industry
The world’s automotive industry is changing, with countries and organisations emphasizing sustainability. The shift towards green mobility is driven by the need to reduce greenhouse gas emissions, mitigate climate change, and lower fossil fuel use. Electric vehicles (EVs), including both battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs), have been the fulcrum of this revolution, with 13.8 million units sold worldwide (18% of all car sales) in 2023, compared to 2.1 million units (2% of all car sales) in 2018 (see Exhibit 2).
With 8.1 million units sold (58.7% of worldwide sales) in 2023, China holds an influential share of the global EV market [7]. The Chinese government has implemented widespread policies to ensure EV adoption, including financial incentives, tax breaks, rigorous emissions controls, and fast development of charging infrastructure [8]. Thanks to these, the share of EV sales reached 38% of all car sales in China in 2023 (see Exhibit 3). Chinese manufacturers, such as BYD, NIO, and XPeng, are leaders in this market, with BYD surpassing Tesla in 2023 as the world’s top EV manufacturer [9].
With 3.3 million units sold (23.9% of worldwide sales) in 2023, Europe is the second-largest market for EVs [10]. Measured by the share of new EV sales in 2023, Sweden is second in Europe (61% of all car sales) after Norway (91% of all car sales) (see Exhibit 3). Germany, Europe’s largest motor industry market, recorded 25% of new car sales as EVs in 2023, driven by investments from Volkswagen and BMW [11]. Volkswagen aims to launch 70 new EV models by 2030 [12]. France, another large automotive market in Europe, also recorded 25% of new car sales as EVs in 2023 (see Exhibit 3). The EU has aggressive targets to reduce greenhouse gas emissions by 55% by 2030, and EVs will be a key part of this strategy [13]. There is room for improvement to achieve this target, as the share of EV sales accounted for only 21% of all car sales in Europe in 2023 (see Exhibit 3). The United States has also been making notable strides toward adopting EVs, aided by the Inflation Reduction Act of 2022, which provides substantial incentives for EV production and buying [14]. In 2023, new EV sales in the United States hit 1.4 million units (compared to 0.3 million in 2018), accounting for 10.1% of worldwide EV sales (see Exhibit 3). The share of EV sales in the United States increased from 2% of all car sales in 2018 to 10% in 2023 (see Exhibit 3). Tesla is the market leader, but legacy manufacturers like General Motors and Ford are aggressively expanding their EV lineups. Ford, for instance, plans to invest USD 50 billion in EV development by 2030 [15].
The evolution of green mobility in Sweden
The automotive industry is key to Sweden’s economy, making 12% of the country’s gross domestic product and providing direct and indirect employment for about 150,000 people [16]. It began in 1891 when Scania started producing railway carriages and later expanded into heavy-duty vehicles [17]. Through the 1970s, Scania was an industry leader in fuel-efficient engine production [18]. Heavy-duty transport benefits from the leading-edge electrification practices of Scania today. Scania’s electric trucks can cover distances up to 600 kilometres on a single charge [19], while Scania’s electric buses are part of a comprehensive solution to enhance sustainable urban mobility [20]. Scania implements renewable energy-powered charging stations across its fleet, while automation solutions and hydrogen fuel cells affirm Scania’s commitment to becoming a sustainability leader in heavy-duty transport [21,22].
Volvo Cars was founded in 1927 in Gothenburg. It has created a reputation for safety, excellence, quality, reliability, and durability with its safety innovations, like the three-point seatbelt launched in 1959, and durable vehicles that survive Sweden’s harsh winters [23]. In 2010, Volvo Cars was acquired by Geely, a Chinese automotive company. With Geely’s financial support, Volvo Cars has invested significantly in sustainable technologies and shifted its strategy to become a full EV manufacturer by 2030 [24]. The company promotes the use of circular economy principles through material recycling, and its EX90 model is equipped with state-of-the-art batteries and manufactured in plants that operate solely on renewable energy sources [25].
Sweden launched its luxury EV line with the creation of Polestar in 2017, which is owned by Volvo Cars and Geely [26]. Polestar’s EVs are manufactured with the use of bio-based composites and vegan interior materials [27]. In addition, the company’s manufacturing facilities run on renewable energy sources. Polestar’s ambition is to create a climate-neutral EV by 2030 [28].
Northvolt, founded in 2016, drives Sweden’s battery innovation network [29]. Through its recycling solution, the company achieves a 95% recovery rate of cobalt and lithium [30]. This is a game-changer in battery production that will decrease the industry’s dependence on raw material imports. The government also aims to enhance circularity in the battery supply chain through the Critical Raw Materials Act [31]. The close partnership between Northvolt and EV manufacturers like Scania, Volvo Cars, and Polestar bolsters its position as a leader in sustainable battery manufacturing [32]. The company’s Northvolt Ett facility in Skellefteå operates solely on renewable energy sources, making it a leader in green industrial practices [33].
The strength of Sweden’s automotive industry is based on visionary technological advancements and a robust commitment to environmentally friendly solutions, such as lightweight materials and energy-efficient manufacturing [34]. Innovations are enabled thanks to strong collaboration between manufacturers, government agencies, and research institutions, like Chalmers University of Technology and Lund University [35,36]. According to the World Economic Forum, Sweden ranks 5th among 141 countries in innovation capability [37]. Its good performance is driven by a high level of research and development expenditures (3.3% of gross domestic product) and a high level of multi-stakeholder collaboration [38].
The government has been a key player in driving the industry’s transition to green mobility. Sweden’s environmental policies began to take shape in the late 1960s and early 1970s [39]. The oil crisis in the 1970s forced Sweden to change its energy policy to alleviate its dependence on oil. The government introduced a carbon tax on fossil fuels and launched tax incentives for the adoption of EVs to reduce greenhouse gas emissions and promote the use of renewable energy resources [40,41]. As a result, renewable energy sources like wind, hydropower, and biofuels provide more than 60% of the country’s electricity [42]. In addition, the government has developed the infrastructure for sustainable transportation, especially in cities. For example, the municipality of Stockholm has promoted electric public transport, bike-sharing programs, and enhanced pedestrian infrastructure [43]. Such projects were financed by issuing green bonds [44]. Incentives for the use of EVs include the Bonus-Malus system, which rewards low-emission vehicle owners with lower registration fees and taxes [45], and the “Ladda Bilen” program, which reimburses up to 50% of the installation of battery charging stations [46]. Thanks to these initiatives, greenhouse gas emissions in Sweden have fallen significantly from their peak level in 1996 (see Exhibit 4).
Sweden joined the EU on January 1, 1995. This allowed Sweden to harmonize its environmental policy programs with more European-wide environmental policies [47]. A key EU policy is the Green Deal, which aims for member countries to reduce their greenhouse gas emissions by 55% by 2030 [48]. This objective is supported by the Fit for 55 Package, a comprehensive collection of legislative proposals designed to align EU policies with the Sustainable Development Goals. Its key proposals are to enhance the EU Emissions Trading System, accelerate the adoption of renewable energy sources, and advance sustainable transportation [49]. Sweden has adapted its regulations to EU policies. Like in many European countries, Sweden has a national framework with Low Emission Zones in eight cities [50]. In addition, Stockholm has had a Zero Emission Zone since 2024 [51]. Sweden’s high level of social progress has an influential role in the country’s transition to green mobility. According to the Social Progress Imperative, Sweden ranks 4th among 170 countries in social progress [52]. It ranks 2nd in environmental quality, lead exposure, and particulate matter pollution, 3rd in outdoor air pollution, and 4th in waste recovery [53]. Society’s high level of awareness and concern for the environment supports the transition.
Challenges ahead
The Swedish automotive industry is a leader in environmental sustainability and green mobility. However, the industry’s dependence on critical minerals, such as lithium, cobalt, and nickel, is the main hurdle for electric battery production. There is instability and trade limitations with locations in Africa and Asia, which supply these critical minerals, creating supply chain vulnerabilities [54]. In addition, increasing global demand for EVs has created immense competition from China, the EU, and the United States. How should the Swedish automotive industry manage risks along its battery supply chain [55]?
High prices create an obstacle for the EV market. The Swedish government employs tax incentives to quicken EV adoption, but these measures typically exclude less affluent market segments [56]. Green mobility transition also faces difficulties in rural areas because there is a lack of charging stations. What economic strategies and regulations can make EVs more affordable and reachable for every socio-economic group, especially in rural areas?
Another challenge concerns maintaining Sweden’s automotive industry’s innovation leadership against rivals from China, the EU, and the United States. What measures should be undertaken to bolster the Swedish automotive industry’s innovation capability? These challenges question the future of Sweden’s leadership in the transition to green mobility. To become a role model in achieving greenhouse gas reduction targets, its automotive industry needs to find ways to tackle them.
Exhibits
Exhibit 1. Location of Sweden
Exhibit 2. Electric car registrations and sales share in the world, China, Europe, and the United States (2018-2023)
Exhibit 3. New EV sales by country in Europe (2023)
Exhibit 4. Greenhouse gas emissions in Sweden (1990-2021)
Endnotes
[1] European Automobile Manufacturers’ Association (2025). Letter to EU leaders. https://www.acea.auto/press-release/act-now-to-prevent-irreparable-damage-to-competitiveness-as-ev-growth-sluggish-and-trade-tensions-rise/
[2] Schwab, K. (2019). The global competitiveness report 2019. World Economic Forum. https://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf
[3] Volvo Cars. (2023). Sustainability strategy and commitment to fossil-free mobility. https://www.volvocars.com/intl/sustainability/highlights/
[4] European Automobile Manufacturers Association (2023). The role of the automotive industry in Europe’s green transition. https://www.acea.auto/
[5] Swedish Energy Agency (2023). Green energy and mobility report. https://www.energimyndigheten.se/en/
[6] International Energy Agency (2023). Net zero by 2050: A roadmap for the global energy sector. https://www.iea.org/reports/net-zero-by-2050
[7] International Energy Agency (n.d.). Global EV outlook. https://www.iea.org
[8] Statista (2023). Sweden’s automotive exports and economic contribution. https://www.statista.com
[9] Reuters (2023). Inflation Reduction Act boosts U.S. EV market and green technology. https://www.reuters.com
[10] International Energy Agency (n.d.). Global EV outlook. https://www.iea.org
[11] European Automobile Manufacturers Association (ACEA). (2023). New passenger car registrations by fuel type in the European Union. https://www.acea.auto/files/20230201_PRPC-fuel_Q4-2022_FINAL-1.pdf
[12] Volkswagen (2023). Volkswagen’s EV strategy: 70 new models by 2030. https://www.volkswagen.com
[13] European Commission (2023). Critical Raw Materials Act: Securing sustainable supply chains for Europe. https://ec.europa.eu
[14] Reuters (2023). Inflation Reduction Act boosts U.S. EV market and green technology. https://www.reuters.com
[15] Ford (2023). Ford’s $50 billion investment in EV development. https://www.ford.com
[16] European Automobile Manufacturers Association (2023). The role of the automotive industry in Sweden. https://www.acea.auto/
[17] Scania (2023). History of Scania: From railway carriages to global leader in heavy-duty vehicles. https://www.scania.com/group/en/home/about-scania/heritage.html
[18] Scania (n.d.). History & heritage: Innovation through time. https://www.scania.com/group/en/home/about-scania/history.html
[19] Scania (n.d.). New energy for your electric truck. https://www.scania.com/group/en/home/products-and-services/trucks/battery-electric-truck/new-energy-for-your-electric-truck.html
[20] Scania (n.d.). Electric buses. https://www.scania.com/group/en/home/products-and-services/buses-and-coaches/urban/electric-buses.html
[21] Scania (2023). Electrified highways and heavy-duty mobility solutions. https://www.scania.com/group/en/home.html
[22] International Energy Agency (2023). Global EV outlook. https://www.iea.org/reports/global-ev-outlook-2023
[23] Volvo Cars (2023). Sustainability strategy and commitment to fossil-free mobility. https://www.volvocars.com
[24] The EV Report (2024). Volvo Cars adjusts electric vehicle strategy. https://theevreport.com/volvo-cars-adjusts-electric-vehicle-strategy
[25] Volvo Cars (2023). Sustainability strategy and commitment to fossil-free mobility. https://www.volvocars.com
[26] Volvo Cars (2017). Volvo’s Polestar electric car brand starts construction at new factory in China. Electrek. https://electrek.co/2017/11/24/volvo-polestar-electric-car-brand-construction-factory-china/
[27] Ellen MacArthur Foundation (2023). Circular economy in automotive. https://ellenmacarthurfoundation.org/
[28] The Guardian (2024, September 16). Polestar’s head of sustainability explains how transparency in the auto industry could change the climate future. https://www.theguardian.com/future-labs-moonshot-2030/2024/sep/16/polestars-head-of-sustainability-explains-how-transparency-in-the-auto-industry-could-change-the-climate-future
[29] Northvolt (n.d.). The timeline. https://northvolt.com/about/
[30] Northvolt (2023). Pioneering closed-loop battery production. https://northvolt.com/
[31] European Commission (2023). Critical Raw Materials Act: Securing sustainable supply chains for Europe. https://ec.europa.eu
[32] Northvolt (2021). Volvo Car Group and Northvolt to join forces in battery development and production. https://northvolt.com/articles/volvo-car-group-and-northvolt-to-join-forces-in-battery-development-and-productio/
[33] Northvolt (n.d.). Northvolt Ett. https://northvolt.com/manufacturing/ett/
[34] Lund University (2022). Technological innovation in Swedish mobility. https://www.lu.se/en/
[35] Chalmers University of Technology (2023). Advancements in AI and energy-efficient vehicle systems. https://www.chalmers.se/en/
[36] Nordic Investment Bank (2022). Gothenburg – the automotive industry on the move. https://www.nib.int/cases/gothenburg-the-automotive-industry-on-the-move
[37] Schwab, K. (2019). The global competitiveness report 2019. World Economic Forum. https://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf
[38] Ibid.
[39] Krantz, O. (2004). Economic growth and economic policy in Sweden in the 20th century: A comparative perspective. Ratio Work Paper, no. 32.
[40] Hammar, H., & Åkerfeldt, S. (2011). CO₂ taxation in Sweden: 20 years of experience and looking ahead. Ministry of Finance, Sweden.
[41] Swedish National Audit Office (2011). Biofuels for a better climate: How does the tax relief work? https://www.environmental-auditing.org/media/4867/sweden_s_eng_biofuels-tax-relief.pdf
[42] International Energy Agency (2023). Global EV outlook. https://www.iea.org/reports/global-ev-outlook-2023
[43] Ibid.
[44] World Economic Forum (2023). How Sweden is driving sustainable innovation in the automotive industry. https://www.weforum.org/
[45] Clean Energy Islands (n.d.). Subsidy Bonus-Malus system in Sweden. https://clean-energy-islands.ec.europa.eu/countries/sweden/legal/res-transport/subsidy-bonus-malus-system
[46] Ampeco (n.d.). Sweden: Electrifying opportunities with EV charging infrastructure funding. https://www.ampeco.com/us/ev-charging-grants-incentives/sweden-electrifying-opportunities-ev-charging-infrastructure-funding
[47] European Union (n.d.). EU enlargement: Sweden. https://ec.europa.eu
[48] European Commission (2020). The European Green Deal. https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en
[49] European Commission (2021). ‘Fit for 55’: Delivering the EU’s 2030 climate target on the way to climate neutrality. https://ec.europa.eu/clima/eu-action/fit-55_en
[50] Urban access regulations in Europe (n.d.). Sweden. https://urbanaccessregulations.eu/countries-mainmenu-147/sweden-mainmenu-248#:~:text=Sweden%20has%20a%20national%20framework%20with%20Low%20Emission,also%20been%20affecting%20cars%20since%201%20January%202020.
[51] Ibid.
[52] Social Progress Imperative (n.d.). 2025 AITi global social progress index. https://www.socialprogress.org/social-progress-index
[53] Ibid.
[54] European Commission (2023). Critical Raw Materials Act: Securing sustainable supply chains for Europe. https://ec.europa.eu
[55] Northvolt (2023). Sustainable battery production and circular economy. https://northvolt.com/ [1] Statista (2023). EV subsidies and adoption trends in Sweden.https://www.statista.com/
[56] Statista (2023). EV subsidies and adoption trends in Sweden. https://www.statista.com/