When Automotive News Europe began its by-segment analysis 15 years ago we decided to divide the world into volume and premium brands. The problem was that five automakers fit neither category so internally we deemed them as near premium. Those automakers were Volvo, Saab, Rover, Alfa Romeo and Lancia. All five had an average transaction price that exceeded the volume brands but that gap didn't match the difference between the volume players and automakers such as BMW and Mercedes-Benz.
To avoid having three categories to track we integrated the five into our premium segments. When we relayed this message to Volvo the company's executives told us they were flattered. They didn't consider themselves worthy of that position.
Today Volvo still doesn't consider itself a true global player in the premium segment. But, of the five near premium brands that we identified 15 years ago, Volvo is the only one with a legitimate chance of rising to the top tier before the end of this decade. Saab and Rover are gone. Lancia is nearly dead (a one-model, one-country strategy dooms it) while Alfa is on its umpteenth turnaround plan after repeated failures.
How has Volvo survived – and now thrives – while its near premium peers flopped? By remaining true to its core value – safety – while continuing to innovate. No one disputes that Volvos are safe. That is a given. The problem is that safety isn't very sexy. And, as competitors began to provide a comparable level of protection to car occupants, Volvo needed to take the next steps to appeal to a wider global audience – all without copying the premium leaders.
While the face of today's Volvos has been influenced by three design bosses, Peter Horbury, Steve Mattin and, since 2013, Thomas Ingenlath, the cars' soul remains Swedish. There is a consistent simplicity in the styling, which is refreshing during an era when overdesign and hyper-decoration is all too common. With the new XC90, which I consider to be the first truly premium vehicle from the brand, Volvo avoids the exaggerated design language that its German rivals currently favor.
The other ways Volvo is carving out a place for itself in the premium segment is through its powertrains and its interiors. It is avoiding the horsepower battle that the Germans are famous for by saying no thanks to six-, eight- and 12-cylinders. Volvo's answer is a family of four-cylinder gasoline and diesel powerplants that offer plenty of performance. To provide even more zip, along with ultralow CO2 figures, Volvo pairs its gasoline engine with an electric motor and lithium ion batteries. The resulting plug-in hybrid variant of the new S90 has a combined 407 hp and CO2 as low as 44 grams per kilometer.
Inside the car Volvo has opted for warm, light-colored interiors and has just eight buttons for the driver to learn thanks to an intuitive touchscreen. Its German rivals think interiors must be black and some of their models have more than 30 levers, knobs and switches to contend with.
More work to do
Despite its success, Volvo is only halfway to its goal, CEO Hakan Samuelsson told us in this issue. Even if Volvo reaches its ambitious target of 800,000 global sales by around 2020, which would mean increasing its volume nearly 60 percent compared with last year, it would still be about a third of the size of its German rivals. Yes, Volvo's first-quarter operating margin of 7.5 percent was on par with Germany's premium brands, but that was just one quarter while BMW, Audi and Mercedes have been delivering that level of profit -- or more -- for years.
The question is whether Volvo can continue to defy gravity? It won't be easy as automakers need to invest billions to not only comply with more stringent global emissions standards but also to make their cars more connected and more autonomous.
This is the real challenge. The difference is that under Chinese owner Zhejiang Geely Holding Volvo now has the cash and the decision-making power to compete at the top level. It had neither during the years it was owned by Ford.
For Samuelsson and his team, the mission is clear: innovate but remain consistent. It has gotten Volvo this far, but as the CEO says, there is still a long way to go.