Revived Volvo turns sights on North America
To me, Volvo is like the soft-spoken, standup guy — the guy who never gets the girl.
Maybe Volvo is more a Kafkaesque hero, condemned to the near-bottom of the automotive pile, without a clear road map to redemption.
Year after year, the Swedish company keeps losing its grip on North America. Despite great brand recognition, it’s one of those rare automakers that haven’t been able to ride the post-recession wave of record-breaking new vehicle sales.
In 2014, Volvo sold just 56,366 and 4,466 vehicles in the U.S. and Canada respectively. That’s just a blip in the market share game. Sure, the automaker was never a major player in North America. But up until the mid-2000s, Volvo had six-figure sales in the U.S. and hovered around the 10,000-unit mark in Canada.
There are several reasons behind Volvo’s performance: It has a branding issue. Everyone admires Volvo but no one really knows where it sits in the automotive hierarchy. Is it premium? Near-premium? Luxury? Or simply niche? Brand confusion is a problem for any manufacturer, but our cutthroat climate of targeted sales and relentless incentives can be merciless if you are not sure of your exact place in the value chain.
Volvo has a pricing problem. Most industry watchers may not think of Volvo as a pure premium brand, but its prices surely are. Why would you pay top dollar for a Volvo when you can get a BMW or Mercedes for similar cost?
Many of Volvo’s woes stem from its years with Ford, which left the company with dated models, poor retail presence and no vision. Its current owner, Chinese automaker Geely, acquired the company in 2010 but has since struggled to expand the brand.
There have been some silver linings of late.
Globally, Volvo has moved the needle a bit. It grew 8.9 per cent in 2014 thanks to strong sales in parts of western Europe and China. Now it’s turning its eyes toward North America.
In a surprising move, Volvo recently announced it would start building cars in the U.S. Its planned production facility in South Carolina, slated to open in 2018, would be its only North American manufacturing presence.
The plant will start with about 100,000 vehicles a year, a clear in- dication that Volvo is aiming to hit the six-figure sweet spot it once used to enjoy in the U.S. and Canada. South Carolina-made Volvos would come north, Volvo Cars of Canada has confirmed.
Building a production plant in such a low-volume region is a bold but necessary move.
It will localize Volvo; that’s always great for optics. It may help Volvo cut costs and make its cars more price-competitive — a necessity for the company.
The manufacturing commitment is also intended as a double whammy.
The company is in the process of revamping of its entire lineup. For starters, Volvo is eyeing the buoyant premium SUV segment with its new XC90.
“The new product initiative begins this month with the delivery of the first new XC90s in Canadian showrooms. In the coming years, the entire model lineup will be revamped; in fact, in four years, the XC90 will be the oldest vehicle in our showrooms,” said Margareta Mahlstedt, Volvo Canada’s vicepresident of marketing and public relations, via email.
Volvo will launch as many as seven new cars over the next three years. The 60-series — which always sells well in North America — will see at least two new updates by 2017 in the form of the S60 and XC60.
Local production footprint and exciting new models could make a great recipe for success. Volvo still needs to keep a laser-sharp focus on its marketing, branding and pricing strategies.
My fear is that the rapid influx of new models may leave a small car company such as Volvo struggling to dedicate adequate dollars and depth to aggressively market these vehicles.
The Geely factor will be critical. The Chinese automaker has so far shown that it’s very much committed to growing Volvo but if it wants Volvo to win over North America, it needs to go all the way. Kumar Saha is a Toronto-based automotive analyst with the global research firm Frost & Sullivan.