Volvo Car Group is designing its first model under the ownership of Chinese billionaire Li Shufu’s Zhejiang Geely Holding Group Co. (175) with an emphasis on automotive safety to revive worldwide sales.
The Swedish automaker, which introduced the three-point seat belt as a standard fitting in 1959, will load its new XC90 sport utility vehicle with crash-avoidance technology and accessories such as a crystal gear-shift lever by glassmaker Orrefors and a proprietary touch screen compatible with Apple Inc. (AAPL) and Android devices. The model is scheduled for its first public presentation on Aug. 26 and enters showrooms next year.
“I hope that through this product, it will allow Volvo to once again find self-confidence,” Li, chairman of both Volvo Cars and Geely, said last month in an interview in Hangzhou, China. “To find once again, the territory that belonged to Volvo in the 50s and 60s, and to once again possess the market share it ought to possess.”
The XC90, replacing a version built since 2002, is the initial vehicle in Volvo’s four-year, $11 billion project to produce a broad range of models on a single manufacturing line offering a selection of electric-power variants and safety components. The automaker is working on a separate setup with Hangzhou-based Geely for a small-car range that will use some elements of the technology.
“This car is Geely and Volvo’s first shot after the merger so it has to be loud and heard widely,” said Han Weiqi, a Shanghai-based analyst at CSC International Holdings. “It also gives a hint on the future of Volvo under Geely’s ownership, which is to consolidate its position as a premium brand.”
Ford Motor Co. (F) bought the company for $6.45 billion in 1999 from Gothenburg-based Volvo AB (VOLVB), which had decided to focus on manufacturing trucks and construction equipment, and the two Swedish vehicle producers no longer have equity ties. Ford sold Volvo Cars to Geely for $1.8 billion in 2010 as the Dearborn, Michigan-based company got rid of premium brands amid a streamlining project after the global recession.
At the time of the purchase, Li said he intends to help Volvo Cars “recover the ability to generate blood” instead of relying on successive blood transfusions.
Volvo’s worldwide sales peaked at 458,000 autos in 2007. Its biggest slice of the U.S., now the world’s second-largest auto market, was 0.8 percent in 2004, versus 0.3 percent now, according to David Ibison, a spokesman. The brand has accounted for a little less than 2 percent of Europe’s auto market for the past three years.
The XC90 will be equipped with a more vertical grille than its predecessor, as well as headlamps and indicator lights embedded in hammer-shaped fixtures. It will come with as much as 400 horsepower with an optional electric motor add-on. Safety features include systems to sense other cars’ distance and speed at an intersection, prevent the SUV from straying from its lane and tighten seat belts in the event it leaves the road.
Volvo Cars is betting on the model helping the company reach annual sales of 800,000 vehicles and an operating margin of 8 percent of revenue, in line with premium-auto competitors, by 2020. The manufacturer sold 427,840 cars in 2013. Delivery growth this year is likely to be “close to 10 percent,” Chief Financial Officer Hans Oscarsson said in an interview, compared with an earlier forecast of a “good 5 percent” gain.
Production of the current SUV at the Torslanda plant ended in July. The model is still being built in Daqing, China, exclusively for sale in that country as the XC90 Classic.
Even with the brand’s focus on safety, which includes a program to eliminate car-crash fatalities by 2020, drivers look at all aspects of a vehicle when buying a Volvo, said Andreas Bauer, a co-manager of the Autohaus am Goetheplatz dealership in Munich that handles the marque.
“The most important thing is that the design of the car appeal to the customers,” Bauer said by phone. “People won’t buy the car for its safety features if they don’t like it aesthetically.”
The new XC90 is part of Volvo’s drive for “more attractive cars” to close the sales gap with BMW, Volkswagen AG’s Audi division and Daimler AG’s Mercedes, the three biggest premium automakers, Chief Executive Officer Hakan Samuelsson said in an Aug. 15 interview at headquarters in Gothenburg’s Torslanda district.
The new SUV is “important because it’s the first car on this new platform: really stand-alone, 100 percent Volvo,” with no Ford components, Samuelsson said. “There is no second chance, of course. This has to work. We’re confident it will.”
(A previous version of this story was corrected to specify the description of the new car’s touch screen).
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