Volvo Cars Plans Luxury Sedan to Challenge BMW’s 5-Series Model – Bloomberg

Posted: Thursday, September 10, 2015

Volvo Car Group will roll out a new mid-size luxury sedan next year, replacing the struggling S80, as the Swedish brand intensifies its effort to lure buyers away from the likes of BMW.

With the new S90, Volvo is relying on Swedish design and reliability to offer an alternative to the BMW 5-Series, Mercedes-Benz E-Class and Audi A6 after the S80 failed to muster much of a challenge. Volvo sold about 12,500 S80s last year, while BMW delivered more than 373,000 5-Series cars.

Following the introduction of the XC90 sport utility vehicle this year, the S90 is the next step in Volvo’s effort to boost annual sales 60 percent to 800,000 vehicles by 2020. The manufacturer is expecting that at least 80 percent of the sedan’s buyers will be new to the brand, about double the rate on the XC90.

“The S90 is the ultimate test,” Alain Visser, Volvo’s sales chief, said at a briefing at the company’s headquarters in Gothenburg. “Of all the cars we’ll be launching in the next four years, from my point of view, the most challenging is the S90.”

Slim Margins

As it completes a five-year, $11 billion investment program, Volvo Cars is at a delicate phase. The carmaker, bought by Chinese billionaire Li Shufu’s Zhejiang Geely Holding Group Co. in 2010 for $1.8 billion, now needs to deliver results. So far, there’s been little to show for those efforts. Its profit margin in the first half of 2015 was 2.2 percent of revenue, compared with BMW’s 8.9 percent.

The revamped XC90, which lists for $49,800, was the first model developed entirely under Li’s ownership. Its reception has been positive, with the waiting list as long as six months in Sweden and customers choosing higher-priced design features or going for the more expensive plug-in hybrid version, Visser said. As of the beginning of this week, Volvo had received orders for 65,000 XC90s, exceeding the full-year target of 50,000.

Volvo, which also sells the midsize XC60 SUV, is considering a smaller model to appeal to the growing number of customers seeking crossovers of all shapes and sizes.

“If you would pick some models being the most important to Volvo, it’s the SUV segment, which is growing rapidly, and you need a smaller one, of course,” said Chief Executive Officer Hakan Samuelsson, 64, who also said his contract has been extended three years. Demand is rising for “small premium cars,” a segment that’s “very attractive for us.”

Volvo in a Box

The new S90 will be unveiled at the Detroit car show in January and will be followed by the V90 wagon version. The company is skipping the Frankfurt motor show next week as part of an effort to make the most of its marketing budget. Instead, the brand is reaching out to customers with its “Volvo in a Box” pop-up stores at places like a food festival in Dusseldorf, Germany.

For Volvo, having a stand at Frankfurt’s sprawling exhibition would be “spending millions of euros to show that Audi, BMW and Mercedes are a lot bigger than us,” said Visser.

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