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Volvo to invest up to $11B, target annual sales of 800,000 by '20

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Old 02-25-11, 06:58 AM
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Post Volvo to invest up to $11B, target annual sales of 800,000 by '20

BEIJING (Bloomberg) -- Volvo Cars, the Swedish automaker acquired by Zhejiang Geely Holding Group Co., plans to invest as much as $11 billion worldwide over the next five years to tap rising demand in markets including China.

Volvo is also working to win government orders and is considering making cars in China for export, CEO Stefan Jacoby said Friday in an interview in Beijing.

"It is obvious that at some point manufacturers will export from China," Jacoby said. "We, as a global premium brand with European heritage, have a very good opportunity to be owned by a Chinese enterprise and to utilize our manufacturing capacities here."

The Swedish brand is counting on increasing Chinese demand to help double global sales to 800,000 vehicles in 10 years.

Half of that growth — slightly more than 400,000 cars — would come from sales in China.

Volvo sold 373,000 vehicles worldwide last year - making it among the smallest luxury brands on a volume basis.


In the United States, Volvo wants to more than double sales to 120,000 cars a year, up from 54,000 in 2010.

But the U.S. market - still rebounding from the global economic crisis and dominated by brands such as Lexus, Mercedes-Benz, BMW, Audi and Cadillac - poses more challenges for Volvo.

Volvo is one of the few luxury brands that does not build vehicles in the U.S. or North America, and a weakening U.S. dollar makes Volvo imports from Europe more expensive.

The automaker must weigh slower sales or cut prices to cope with the disadvantage. Volvo executives told The Wall Street Journal today the automaker is exploring moves to mitigate the problem.

Premium marques including Volvo, Audi AG and Daimler AG are expanding in China, the world's biggest automobile market and second-largest economy, as rising incomes and economic growth boost spending.

"There is no doubt about the super importance of the Chinese market to Volvo," said Yu Bing, an analyst with Pingan Securities Co. in Shenzhen.

"The vital question lies with whether Volvo would be able to avoid any discounts in its brand's premium value because of the takeover by a Chinese homegrown carmaker."

Volvo, which Ford Motor Co. sold to Zhejiang Geely in August for $1.5 billion, aims to sell 200,000 cars in China by 2015, up from 30,522 in 2010, Jacoby said today. Volvo also plans to increase its dealers in China to more than 220 by 2015 from the current 106, according to the company.

The carmaker is working to increase sales to the central and local governments in China, Jacoby said. "Being owned by a Chinese enterprise offers us additional opportunities in getting into the government fleet business," he said.

Volvo will invest in a new plant in the city of Chengdu, southwestern China, and will continue to consider setting up a plant in Daqing in northeastern China, the company said. Shanghai will serve as Volvo's China headquarters and center for product development, design and sourcing.

Geely produced its first car, a subcompact, in 1997 and was the eighth-biggest automaker in China last year.

Economic growth and government incentives boosted China's vehicle sales 32 percent to 18.1 million in 2010, making the nation the world's largest auto market for a second year.

Volvo's main rivals boosted their China sales last year. Volkswagen AG's Audi sold 227,938 cars in China, up 43 percent from 2009. Daimler AG's Mercedes-Benz more than doubled sales to 148,400, while BMW AG sold 168,998 units, an 87 percent gain.

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Old 02-25-11, 07:51 AM
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PhilipMSPT
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They can do it if they focus on China and India.

I don't think they'll be able to dramatically change American preferences by 2020.
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Old 02-25-11, 09:15 AM
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mmarshall
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Originally Posted by PhilipMSPT
I don't think they'll be able to dramatically change American preferences by 2020.
Volvo, in this country, is (somewhat unfairly, IMO) stuck with a long-standing schoolteacher/professor/librarian/safety-freak image, and has generally not appealed to the general American public at large, though I see a fair number of them in the D.C. area here. Long ago, back in the late 1990's, they shed the old square/shoe-box styling, and are now competitive with the upmarket German brands in many ways, but the public still seems to shun them like they did years ago. I myself, however, like the XC-70 Cross-Country, and if it wasn't for the Subaru Outback that is a better dollar-for-dollar value, would (possibly) be driving one.
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Old 02-25-11, 09:54 AM
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I think a large part of the problem is that Volvo cars don't exactly excel in any given area and nor are they value-priced in a manner that makes up for their shortcomings. They are dollar for dollar, very close to Lexus, MB and BMW in price within the segments where they compete.

Typically...

They aren't as luxurious, reliable or well made as Lexus.

They aren't as high tech or prestigeous as Mercedes.

They aren't as sporty or fun to drive as BMW.

So, in essence (and in my experience), you're usually looking at a Volvo that isn't as luxurious, well made, reliable, high tech, prestigeous, sporty or fun to drive as the established players.......for the same amount of money. Volvo's longtime claim to safety is no longer valid as many competing brands are just as well scored...so...it begs the question...why would you buy one?

At this point, brands like Audi, Infiniti and even Hyundai present a more compelling reason for purchase and are enjoying the scraps that fall off the Tier 1 dinner table.

Most of the Volvo owners that I know, my family included, purchase one because they want something different from the usual luxury brands that we see everywhere. I just wonder if there are enough of these fringe buyers to really keep the brand going in the future, especially considering pressure from the brands mentioned above.
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Old 02-25-11, 10:07 AM
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Originally Posted by MPLexus301
I think a large part of the problem is that Volvo cars don't exactly excel in any given area and nor are they value-priced in a manner that makes up for their shortcomings. They are dollar for dollar, very close to Lexus, MB and BMW in price within the segments where they compete.

.
Agreed, therefore Volvo has never once been on my shopping list of premium vehicles. For the astute buyer, old stereotypes are not a problem when compared to the real shortcomings.
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Old 02-25-11, 10:16 AM
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I never took Volvo as luxury. Whats luxurious about it? Their designs try to be somehow different but always end up not being as bold or as sharp as their luxury competition. They look very thin and blend in with the rest of the "ordinary" cars. Interiors are not luxurious at all in terms of design and features and I am not talking about missing wood inserts here. I think new Saab has more luxurious feeling cabin than any Volvo. Technology? Their engines are nothing special so we can start with that.

Volvo's line up is as luxurious as Acura TSX if you ever consider that as luxury car. But rest of the Acura's lineup can teach Volvo thing or two about being luxury brand. That's how I perceive Volvo.

But the real question is where are they going to get 11B dollars from? Or they are just laying out the plan like Lotus did and then hope money will come?
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Old 02-25-11, 12:52 PM
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I like new designs like XC60.... but interiors are just not luxurious enough.... they look fine on pics, but sit inside and your realize that quality of materials is not up to par with Lexus.
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Old 02-25-11, 01:36 PM
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Volvo is always given me a image of a oldman's car design........like Buick, Oldsmobile, Mercury, Linclon....

BTW, last time we went to Volvo dealer we are technically invisible. Nor did anyone greet us or ask if we need help after 15 minutes. Then we went to Lexus and the salesman walk us through each car we looked into. My friend's father walked out with a new RX350 puchase.......No way I will buy a Volvo anytime until they chagne their ugly logo...
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Old 02-25-11, 02:02 PM
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Originally Posted by grabber2
No way I will buy a Volvo anytime until they chagne their ugly logo...
Logo is so forgettable, I don't even remember what the logo looks like.

Maybe it's shaped like the box that safety used to come in.
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Old 02-25-11, 05:40 PM
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Volvo has always been a niche brand: too expensive and unique to appeal to those shopping for a mainline brand but not premium/luxury either. So it was neither Ford nor Lincoln (and definitely not Mercedes-Benz or Jaguar either).

It was Ford that elevated Volvo to a premium brand when it was placed in their Premier Automotive Group, along with Mercury, Lincoln, Aston Martin, Jaguar and Land Rover, in 1999. Lincoln and Mercury soon left PAG, since they did not really belong in a corporate group that included Aston Martin and Jaguar, but Volvo stayed. Volvo has been labelled as a premium brand ever since but I don't think they ever shook that "schoolteacher/professor/librarian/safety-freak image". I do not believe that they really tried to shake that image and move up to a true luxury image and brand either.
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Old 02-25-11, 11:04 PM
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Lol, I don't why you guys are hating on Volvo. They are supposed to be seen as the good guys IMHO. Sure, they may not be the best but hey, they do build cars just as well imho.

Sure we are all entitled to our own opinion and all but imho, we shouldn't discount Volvo either.

They may not be as big as a company as let's say VW but hey, I'd rather buy a V60 over a Passat anyday

Two cents
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Old 02-26-11, 12:15 AM
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I really like the new S60 and XC60. Definitely good solid models. I have hopes for the next S40.
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Old 02-26-11, 07:12 AM
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Does anybody here own a Volvo? ( or has anybody owned one in last 20 years?)
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Old 02-26-11, 08:52 AM
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I own an XC60, no reliability issues, interior is just as good as my rx400h. I can't complain other than a somewhat firm ride and average fuel economy.
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Old 02-26-11, 08:54 AM
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Originally Posted by IS-SV
Does anybody here own a Volvo? ( or has anybody owned one in last 20 years?)
That made me chuckle

To me Volvo meant square but stylish and safety. When they went to chase more rounded styling and more sport they lost me. I think they should have stuck to square and safety, at least everyone knew what a Volvo was about. Today the message is mixed, if they have a message.

This is how we do in Atlanta


Last edited by LexFather; 02-26-11 at 08:57 AM.
 


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