With news that Volvo Cars of North America has confirmed that the V50 will be scrapped from its books – and talk of further line-up rationalisation – one has to wonder what impact this will have on Volvo’s future global strategies. And in South Africa.
Volvo has always been a curious case; offering products that straddle traditional market segments and trying to become a worthy contender in the premium and luxury segments, but never being able to match its German rivals with what really matters: Product.
The Volvo line-up in the US looks similar to the one in South Africa (sporting nine nameplates), but according to Douglas Speck, President and CEO of Volvo Cars in North America, the company would be comfortable focusing on about six distinct models. That means that three or four models will get the chop: Going on current sales information the new S60, XC60 and XC90 SUV should be safe, but that leaves the C30, C70 and XC70 station wagon in precarious positions. It has been confirmed that the V50 station wagon is the first to go.
For the buying public the problem is one of an identity crisis. The S40 is a prime example: it’s about as spacious and well-specced as the 3-Series, A4 and C-Class, but Volvo positioned it as a sub-compact (basically as an alternative to the VW Golf). The problem in the premium segments is that image matters and the result was something of an identity crisis in the Volvo boardroom – the launch of the young, hip and exciting C30 apparently heralded a new direction for the Swedish company, but never managed to attract the number of younger buyers that Volvo craved. We doubt if the C30 will survive the culling in North America.
It has been a long-time rumour that Volvo in Sweden plans to scrap the S40 – with the S60 now straddling the compact and executive saloon segments. The problem for Volvo is that most of its premium rivals – in the form of BMW, Audi/Volkswagen and Mercedes-Benz – are in the process of aggressive expansion and new-product development. BMW and Mercedes’ station wagons are among their top sellers, so why has Volvo’s sales slumped? And how will product rationalisation turn six years of declining sales in the US into double-digit growth? That being said, the company has a very limited budget and focusing on core products is perhaps not the worst strategy for now, but only if the Swedes are feverishly working on marketing to new niches and developing products that can – once and for all – stand up against the Germans.
The situation in South Africa is no different, although we have not had any indication of planned rationalisation from Volvo Cars South Africa. According to a spokesperson, Volvo Cars SA would want to retain the V50 and S40 for as long as possible as it forms an important part of Volvo’s entry-level offerings (both the entry and large SUV segments are of critical importance locally). However, both the V50 and S40 are nearing the end of their lifecycles. We doubt if any local cuts will happen with the pace and aggression of the US operation. The S80 and XC70 are receiving minor facelifts later this year and local sales of the C30 and C70 seem to be doing fine after comprehensive restyling in 2010. However, North America is a major market for Volvo and future product availability and development will undoubtedly be shaped by the demand stateside.
All is not lost however, because the company did post a profit in 2010 – the first time since 2005. The new S60 is successful in Europe and North America and we are sure that Geely – Volvo’s Chinese owners – has injected a fair amount of capital into its new acquisition. This has also given Volvo a welcome foothold in the Chinese market which, for the most part, mirrors the buying characteristics of the US. Volvo plans to show a plug-in hybrid of the V60 (the S60 wagon) at the Geneva Show in March – pointing to a commitment to new product development. Let’s just hope that the company has done some soul searching in the boardroom.
