Volvo push to revive faltering US business
Volvo Cars is to double its marketing budget in the US as it seeks to revive its faltering business there and keep a nascent turnround at the Swedish carmaker on track.
Håkan Samuelsson, Volvo’s chief executive, laid out a four-point action plan to try to lift American sales from the current 62,200 vehicles to 100,000. US sales have fallen or stagnated in the past five years.
The US remains the biggest market for Volvo, which is owned by Chinese carmaker Geely. But the Chinese market is just a whisker behind, after a 46 per cent increase in sales last year against a 10 per cent decline in the US.
That strong performance in China lifted Volvo to an operating profit of SKr2.5bn ($390m) in the second half of 2013 after losses in the same period in 2012, as well as in the first half of last year.
Mr Samuelsson, chief executive for the past 18 months after a long stint in charge of German truckmaker MAN, has cut costs by SKr1.5bn and put a focus on China, where Volvo opened its first factory in recent months.
He has also drawn a line under the leadership of his predecessor Stefan Jacoby, now at General Motors, and has abandoned or played down a number of Mr Jacoby’s targets. Volvo still aims to sell 800,000 cars by 2020 – up from the 428,000 it sold last year – but Mr Samuelsson said it was not “the prime target”, with selling “attractive cars” being more important.
A goal to sell 200,000 cars in China by 2015 has been pushed back by five years as Volvo sold only 62,100 there last year.
Mr Samuelsson also criticised the decision by Mr Jacoby to stop US sales of the V40 hatchback, saying the 100,000 target in North America would not be reached without a “broader product offering”.
His plans for the US involved “better market communication” and products more suited to the local market. He aims to sell cars with “more attractive specs in showrooms”; offer different models for different parts of the country; improve used values in an effort to boost the leasing business; and introduce new products such as the V60 estate and XC90 SUV.
Mr Samuelsson said he saw no reason why Volvo could not achieve similar margins to premium rivals such as BMW, Audi and Mercedes in the long term. “It is definitely realistic to reach premium profitability in the region of 8 per cent of [operating profit],” he told the Financial Times.
But he conceded that it would not be possible to maintain the operating margin of 3.8 per cent from the second half of 2013 this year because of “a very strong headwind” with the strength of the euro. Instead, he forecast sales growth of 5 per cent and a “stable, solid” operating profit.
Volvo is viewed sceptically by many industry observers who believe it does not have the necessary scale to compete with or sell cars for the same price as the industry-leading German luxury carmakers.