To survive, quirky Swedish carmaker Volvo was sold to a Chinese company Zhejiang Geely Holding Group. Talk about your odd couples. But by all accounts, Volvo has fared much better than its other quirky Swedish rival, Saab, which stopped making cars in 2011.
Small carmakers Volvo and Saab were clobbered by the automotive industry crisis of 2008-2010. At the time, Volvo was owned by Ford, which sold off its luxury car brands such as Jaguar, Land Rover and Volvo to survive the downturn. General Motors owned Saab, and after some false starts, Saab ceased making cars although its commercial truck and defense vehicle businesses continued.
Fortunately, for Li Shufu, chairman of Zhejiang Geely Holdings, the 2010 purchase of Volvo was a labor of love. Li told the Wall Street Journal he saw Volvo as a “mysterious, beautiful woman,” before launching on a multi-year makeover of the company.
Volvo began making cars and light truck in 1927 in Gothenburg, Sweden. Commercial vehicles were always the more significant part of the business. The truck business was separated from the car business in 1999.
Volvo cars always suffered from small sales and lack of capital to invest in technology upgrades. What Volvo had was a reputation for safety and a small but extremely loyal customer base.
For years, Volvo advertised the safety features of its cars, which started with high-strength Swedish steel. The company pioneered innovations such as safety belts and crush zones. The designs were quirky as well, generally boxy shapes that allowed plenty of interior room but had the aerodynamic qualities of a brick.
As a luxury carmaker, Volvo sort of competed with Audi, BMW and Mercedes-Benz. For instance, for every car Volvo sells, Volkswagen sells 20 vehicles. So Volvo couldn’t afford to make major model updates as frequently to compete on features and price.
Worldwide, Volvo sales are moving in the right direction. In 2017, Volvo Cars sold 571,577 cars, the company’s fourth consecutive year of record sales. Overall, Volvo has a global market share of 1-2%. The largest market is now in China, with 20% of the sales volume, followed by the U.S. (14%), Sweden (13%), the UK (8%) and Germany (7%). Today, Volvo sells more vehicles in China – 90,417 last year – than in any other country, including Sweden. That’s three times more than the company sold there in 2010.
Charting the future
Fears were that Geely would turn out cheap, unreliable cars and slap the luxury Volvo brand on them. But so far those fears have been unfounded. Geely and Volvo operate independently, and Chairman Li has invested billions in updating the styling, technology and manufacturing base.
Volvo has introduced nine new models, revising its entire product line. Volvo has built an engine plant and two vehicle assembly factories in China, and opened an assembly facility in South Carolina, while also expanding research and development centers in Sweden and California.
To focus its scarce dollars, Volvo went all in on 4-cylinder engine platform, forsaking six-cylinder development. The gamble paid off with the XC90, a luxury SUV powered by the four-cylinder was named the North American Truck/Utility of the Year in 2016.
It’s the third largest seller behind the XC60 and V40 models.
Rather than moving to the mainstream, Volvo is charting its own path through the uncertain future of the automobile. The company’s goal is to put a million electrified vehicles on the road by 2025 so all Volvo models launched after 2019 will be hybrids or fully electric.
Building on its heritage of safety the company has pledged to build a “death proof” car by 2020. That means no one will be seriously injured or killed driving a new Volvo. How? By loading it with safety tech like adaptive cruise control, auto steering, and pedestrian and animal detection and avoidance.
The Volvo brand will be attached to the Polestar 1, a $155,000, 600 hp hybrid coupe that will be a flagship high-performance electric car to build demand and develop new technology.
Fortunately, Volvo’s potential sob story has a happy ending so far. There’s plenty of room in the marketplace for a scrappy underdog to keep the big guys honest.
Bloomberg – https://www.bloomberg.com/news/features/2018-05-24/volvo-is-better-than-ever-thanks-to-this-chinese-billionaire
Forbes – https://www.forbes.com/sites/pamelaambler/2018/01/23/volvo-geely-the-unlikely-marriage-of-swedish-tech-and-chinese-manufacturing-might-that-earned-record-profits/#3547e34c4ecc
Volvo – https://www.media.volvocars.com/global/en-gb/media/pressreleases/231036/volvo-cars-launch-new-s60-sports-sedan-the-first-volvo-car-made-in-the-usa