Volvo’s Declining Sales: Will This New Strategy Help?
It’s no secret that Volvo is on the ropes in the American market. From an all-time high of 139,384 cars stateside in 2004, sales have fallen off almost every year since, and last year, it only managed to sell 56,366 cars, even while the company posted record-setting sales numbers worldwide. So far, it looks like 2015 could be even worse. With aging models, an unfocused brand image, and a small dealership network, the once venerated safety car company has been seriously at risk of becoming the next automaker to disappear from American roads.
But Volvo won’t leave without a fight. After being cast off by Ford during the global financial crisis, it was acquired by Zhejiang Geely Holding Group, the deep-pocketed parent company of the Geely brand, and a company with a long-held desire to become the first successful Chinese automaker in America. While the company has given Volvo enough room to launch an ambitious rebuilding project, it also sees the Volvo as its entryway to the U.S. market. At the heart of Geely-Volvo’s plan is a bold dual-front invasion of the American market that will put more Volvos on U.S. roads by the end of the decade than ever before.
This year, a Volvo S60 model will be the first Chinese-built mass-production car to reach American showrooms. While this is an important first, this doesn’t mean the majority of future Volvos will be imported from the East. After months of negotiations, the company has just inked a deal to build a $500 million factory in South Carolina, its first plant in North America, and it’s set to open in 2018.
It’s no coincidence that Volvo wants cars rolling off its American production line by 2018. Under the company’s current rebuilding plan, that’s the target date for eight all-new models to debut, and the company hopes that within 10 years, the plant will be on track to employ 4,000 workers and be running near its 100,000 cars a year production capacity.
The plant was the culmination of heavy negotiations, including a bitter contest between South Carolina and Georgia to land the facility. Eventually, the company saw BMW’s success in the state as a template and accepted South Carolina’s $210 million incentive package. The decision was felt especially hard in Georgia, which had aggressively courted Volvo after Ford and General Motors recently shuttered plants in the state.
Volvo has yet to announce which vehicles it will build at its new facility, but that’s because it’s likely that the cars haven’t left the design stage yet. As part of its rebuilding plan, the only model that will survive the company’s sea change is the all new XC90 SUV, which has been universally praised for its design and handling, and will go on sale in the U.S. next month. The XC90 is based on Volvo’s new Scalable Product Architecture, a modular platform that will underpin all eight upcoming models, from compact sedans to crossover SUVs. The SPA’s versatility should provide the American plant with plenty of options.
It’s impossible to tell if Volvo’s new models will be successful enough for the company to nearly double its sales and allow the company to operate the new plant at or near capacity within a decade. But at the very least, as a Swedish company that will have the bulk of its American products either built in South Carolina or imported from China, it shows just how complex the automotive world is today. For decades, Volvo has built some of the most unique cars in the world. With its ambitious plan, it looks like the Swedish brand will be staying in America for a while yet, and true to form, it’s doing things in its own unique way.
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