Volvo Has High Hopes for New S90 Sedan
November 30 2015 - 12:00PM
Dow Jones News
STOCKHOLM—The new sedan Volvo Car Corp. is set to unveil
Wednesday carries the Swedish company's hopes of breaking into the
small club of luxury car makers without breaking the bank.
Volvo is launching the new car, the S90, with the aim of
competing with German gold standards such as Audi's A6 or BMW's 5
series. It can rely on new factories and in-house technologies
developed since parting with Ford Motor Co. in 2010. It has also
hired a German designer, Thomas Ingenlath, who has worked for Audi
and other brands of Volkswagen AG.
But with a small budget compared with its German rivals, Volvo,
now owned by Zhejiang Geely Holding Group Co. of China, says it has
had to weigh every krona it invested.
Volvo's main concession to the traditional attributes of luxury
sedans is under the hood: the S90 won't have a six or
eight-cylinder engine, but a more modest four-cylinder already used
in other models. Although the Volvo engine delivers respectable
horsepower, company executives believe it may put off some luxury
buyers who want more cylinders.
"Those who really want that, we will lose them," Volvo's head of
marketing Alain Visser said in a recent interview, before taking a
position at Geely Auto.
Volvo has a lot riding on the S90, the second car developed
entirely under its Chinese owner, as it aims to boost sales to
800,000 by 2020, a 70% increase from the 2014 level. The company
also wants to lift its operating profit margin to at least 8% at
the turn of the decade from 2.2% in the first half of 2015.
The first fruit of an $11-billion investment plan, the XC90 SUV
was launched in August of last year and has garnered 80,000 car
orders to date, a solid performance according to analysts. The
popularity of the new SUV has helped power a turnaround for Volvo
on the U.S. market, with sales up 12.5% in the first 10 months of
this year, following a decade of decline during which unit sales
had dropped to 56,000 in 2014.
With the new S90 sedan, Volvo hopes to keep up momentum on the
U.S. market and to prop up sales in China, where demand for its
cars has fallen this year amid a deeper-than-expected economic
slowdown.
The S90 is a litmus test for Volvo's three-pronged strategy of
increasing both volume and profit while moving up market, because
the company has almost no presence in the luxury sedan
territory.
By its own admission, its previous foray into this segment, the
S80—a car which has a starting price of $43,450 in the U.S.--has
been a commercial flop.
Volvo has sold fewer than 600,000 S80s in the car's
18-year-career. By comparison BMW sold more than 370,000 of its 5
series last year.
Before taking responsibility at Geely Auto, Mr. Visser predicted
the company would have to take eight out of 10 S90 customers from
rival brands.
"If we fish in the pond of existing S80 customers, you know…by
the time we've called all three of them, it's over."
Write to Christina Zander at christina.zander@wsj.com
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(END) Dow Jones Newswires
November 30, 2015 11:45 ET (16:45 GMT)
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