Volvo Targets Significant Growth

Volvo says it plans to sell 800,000 vehicles globally by 2020, a significant hike from the 449,225 units it sold last year.

The auto maker is confident it can achieve the lofty goal, claiming its sales rose 25% in the U.S. last year and 20% worldwide, making it the fastest-growing luxury brand on a percentage basis, according to data provided by Volvo.

“I think that is achievable for us, and we might achieve it earlier,” Stefan Jacoby, president and CEO, tells WardsAuto in a recent interview. “With our strategy here in North America, and setting a better pace in Europe and growing in China, it gives us potential to grow.”

The executive says much of the recent growth is due to the popularity of the XC60 cross/utility vehicle, which saw U.S. deliveries climb 7.5% in 2011, according to WardsAuto data.

The S60 sports sedan also is driving demand, with 21,282 deliveries in the U.S. last year. Year-over-year comparisons are not possible as the vehicle went on sale in late 2010.

“Our strategy is paying out – concentrating core products in core American segments – and we have a high demand for both of these vehicles,” Jacoby says.

New technologies that also could bolster Volvo sales are on the way. The auto maker plans to transition to an all-4-cyl. lineup in the next five years and will be launching a new flexible architecture that will underpin most of its global vehicles.

A diesel plug-in hybrid-electric version of the V60 wagon arrives next year in Europe.

A gasoline-powered PHEV will arrive about 2016 in the U.S. and China, but Volvo has yet to announce what model will be used for a production version. An XC60 PHEV was shown in concept form at last month’s Detroit auto show.

The PHEV also will be powered by an electric motor producing 52 kW (70 hp) and a 4-cyl. turbocharged engine. The motor and engine produce a combined 350 hp.

The vehicle will be able to drive up to 35 miles (56 km) on electricity only or, at the switch of a button, operate as a normal hybrid achieving a 50 mpg (4.7 L/100 km) fuel-economy rating.

Although Volvo has yet to sell a traditional hybrid-electric vehicle, Jacoby says it makes sense to go right to the PHEV, which features more advanced technologies.

“PHEV fuel efficiency is significantly higher,” he says. “It’s an advanced technology, a step ahead of a traditional hybrid.”

Much of Volvo’s anticipated growth will come from China, Jacoby says, noting luxury-vehicle sales there are outpacing all other segments. Volvo’s positioning has been strengthened in the country since China’s Zhejiang Geely purchased the Swedish auto maker from former owner Ford.

Geely ownership provides “a lot of insight that (competitors) don’t have, and that gives us an advantage in the world’s biggest market,” Jacoby says. “We can obviously benefit from the inside knowledge of Geely.”

What Geely doesn’t provide is an opportunity to share technologies on a vast scale and provide economies of scale. Jacoby says Volvo is a global luxury maker, while Geely produces mass-market cars for sale within China only, making sharing difficult.

To prepare for expansion in China, Volvo is building a new assembly plant there, which will boost its global capacity from 500,000 units to 800,000 annually.

The auto maker also is working to shore up its supply base in China, but only where it makes sense, Jacoby says.

“We have established suppliers, which we need for many reasons,” he says, “but we’re very open-minded for getting excellent Chinese suppliers, as well.”

Other growth markets Volvo is eyeing include Russia, India, Brazil and Eastern Europe, says Doug Speck, senior vice president-marketing, sales and service.

Volvo sales spiked 78% in Russia last year, combined with overall industry growth of 30%, he says. The auto maker recently completed a 6-month review of India and has plans to expand there over the next decade.

Brazil “is interesting, and there is a lot of growth there,” Speck says. “But they keep changing the tax structure, so it makes you have to re-evaluate your business strategy.”

He says in fourth-quarter 2011, Brazil increased tariffs on imports some 30% “basically overnight.”

Eastern Europe, particularly Turkey, is promising, Speck says, noting Volvo set new sales records in that country last year.

Perhaps the greatest potential obstacle to Volvo’s growth plans is Europe, where sovereign debt issues have crippled the auto industry.

“Of all the major regions in the world, it’s the one where there is the most concern right now,” Speck says. “We still expect some growth there, but less than the past few years.”

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