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Why Volvo CEO believes his automaker is better off than rivals in China

Hakan Samuelsson: "I think we have the best balance of fuel consumption and power in the business."
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Volvo CEO Hakan Samuelsson says his company's relationship with owner Zhejiang Geely Holding gives it a big advantage over rivals in China, where he expects double-digit growth for Volvo in 2014. Samuelsson also says Volvo is poised to benefit from tougher CO2 limits in Europe. Samuelsson explained why during a recent interview with Automotive News Europe Managing Editor Douglas A. Bolduc, Automotive News Enterprise Editor Dave Guilford and Automotive News Reporter Diana T. Kurylko.

Is there an advantage from having Zhejiang Geely as your owner?

What's unique about our situation is that while everyone else has arm's-length partnerships we have a joint venture with our owner. We have no reason to hold back certain technology. We can do more with our partnership than the others. Also, we don't just get volumes from China, we see it as an opportunity to build a supply base we can use locally. We’ll use China for product development to a larger extent than other companies and we see China as a global production base.

Are the tougher European CO2 rules for 2020 an opportunity for Volvo?

The ones who will prosper from this are the ones with the right engines. I think we are at the forefront with our new Drive-E range. I think we have the best balance of fuel consumption and power in the business. That will help us.

Are automakers discounting less in Europe now that car sales are rising?

It’s a bit better because when the market is shrinking people like to compensate [with discounts]. We have always said that we are not in the position to do that because we are focusing on profitability. We managed to maintain our market share in Europe last year and we aim to do the same this year. But, due to the pricing issues, this is not the year to try to take market share. We will follow the market. That means we will grow by some percentage if Europe rises. At worst, Europe will be flat this year.

What about U.S. and China sales?

For the full year our target is to grow with the U.S. market, which is expected to be up 2 to 5 percent. The premium segment in China will grow more than 20 percent again this year. We were up 46 percent in China so we should outperform the market again this year.

Do you need a U.S. plant?

It’s not a priority now. Long-term though, Volvo will have to look at production in the U.S.

What must the new XC90 deliver?

It has to deliver a modern, elegant design. It must deliver new safety features, especially on the active safety side. It has to deliver an intuitive HMI system with fewer buttons and a touchscreen-approach similar to the iPad. Also Apple’s IOS will be part of the new car. That is a new level of functionality. It also has to deliver environmental friendliness, which it will via the Drive-E engines. It will be a step forward compared with the old model and what’s currently available on the market.

Meet the boss
NAME: Hakan Samuelsson
TITLE: Volvo Car CEO
AGE: 63
MAIN CHALLENGES: Maintaining European market share and overall profitability while avoiding pressure to offer discounts; building excitement for the XC90's upcoming launch.

Why does Volvo want to be a leader in autonomous driving?

The ones who will be credible in this area will be the ones who are credible in safety. That’s why we want to be No. 1. We also have our bold vision that by 2020 no one should be killed or severely injured in a Volvo car. This is quite a challenge, but we are aware of the commitment we’ve made. We are on our way. These technologies are crucial.

Volkswagen CEO Martin Winterkorn says we are heading into an era of shorter model cycles and a lot more variants. Do you agree?

If you have the ambition to be the biggest automaker in the world, you need as many variants as possible. I would agree there is an appetite for body styles, especially if you show them to the customers. But it’s also important that you manage complexity and costs. We will be very careful not to over-utilize the technical means that our modularity offers because the added complexity could be a problem in the end. Just look at mobile phone providers. Some companies offer 100s of different models and they are being beaten by someone with just one model. Some believe that you have to be bigger to have economies of scale. That can work. But there are people who have proved that it’s not always right just to be big.

What is the right way to solve Europe’s overcapacity issue?

It’s a rather simple solution that has not changed from the past, if you are not competitive you have to be ready to scale back capacity.

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You can reach Douglas A. Bolduc at dbolduc@crain.com.

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