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Why Volvo’s CEO Samuelsson sees disruption as a ‘huge opportunity’

Volvo CEO Hakan Samuelsson is more convinced than ever that the Geely-owned automaker needs to capitalize on the disruptive movements taking place in the industry.

Volvo aims to use its small size, compared with BMW or Mercedes-Benz, to generate half its global sales from full-electric cars by 2025 and have one-third of the cars it sells to be fully autonomous by then. A more immediate goal in Samuelsson’s sights is to break the automaker’s worldwide vehicle sales record for a sixth straight year. He discussed this and more with Automotive News Europe Managing Editor Douglas A. Bolduc

Is Volvo on track to sell 700,000 cars this year?

It’s absolutely achievable this year and our ambition is to reach 800,000 next year. We have always said that when we reach that we should also be as profitable as our premium colleagues, which means a margin of about 8 percent. We are on the way because we have never had such a strong product offering.

Your German premium rivals are trying to save money through cost cuts. Does Volvo need to take any steps such as reducing staff?

Yes, but it will mainly be consultants. We have been reducing their numbers and squeezing them a bit harder. In addition, we are more frequently asking why we can’t do a task or a project ourselves. We are also going to be more restrictive when it comes to hiring.

Could you share any figures on your planned cuts?

We have the numbers but we haven’t communicated them externally, and we don’t plan to because it could give the impression that we have to rely on cost cuts to achieve our strategy. That is not the case. Our success is coming from excellent cars, which hopefully will slowly convince people that we are an interesting alternative.

The industry is moving quickly toward making cars electric and autonomous. You have said that Volvo should be at the forefront of this shift. How is Volvo doing in reaching this goal?

We are more convinced than ever that being at the forefront of these so-called disruptive movements is crucial. As a small company making this shift will help us achieve our goal of becoming more premium and being more relevant in the global arena. If we don’t do this then we would be following what others are doing — or have already done. Disruption or change is a huge opportunity for a small company.

Is it easier for a company of Volvo’s size to achieve this transition compared with larger rivals?

If you are a big company you might see all of these changes as threats, but we see them as an opportunity. With that as the base, I will probably never be satisfied with how fast we are moving. I would like to see us move faster but it is also important to bring the entire organization with you. That is often the challenge. There are internal forces that want to operate as you always have, so it is a challenge to get them to go along with the change. But that is what we have to do.

What about the ongoing move toward offering self-driving cars?

When it comes to that it is a bit more challenging technically than we originally thought. But we are still convinced our next-generation cars should have what we call a Highway Pilot [which takes control of the car on a highway]. We will be very careful to avoid bringing out something that is perceived to be automated and it’s not, but the driver is impressed with what he can do with the system and then overestimates the capabilities. We really want to deliver something that is as safe or even safer than the impression you get. That will come, first for usage on the highway.

And the shift to electrification?

We are well underway with models such as the [full-electric] Polestar 2 and the XC40 coming next year. We firmly believe there will be a battery-electric car market that is big enough for us. Until then what we have is a very good solution, the TwinEngine plug-in hybrid. These cars can be driven roughly 50 percent of the time in full-electric mode. They account for about 10 percent of the sales in the model lines where the technology is available, which is a very high percentage. We have an ambitious ramp up as we will not release any future models that are combustion only. At a minimum they will be mild hybrids. Another area where I would like us to progress more is with the way we bring mobility to consumers.

How so?

We have traditionally sold cars to customers but we believe they would like to have mobility in other ways. And it shouldn’t be overly complicated. They want the freedom to move. To get this in the past I had to go to the dealership with a lot of money because I bought a car in cash. Then I could get a loan. Then I could lease it. What will be very attractive in the future is paying a flat subscription rate for the product. You still get the freedom to move because this car is at your disposal. After three years if you like it you keep it for three or four more years. If you want a bigger one you change to a bigger one. If you don’t want it anymore you cancel the contract. That’s what you get with Care by Volvo.

Will this ever be profitable?

There is absolutely no reason why this should not be as profitable as leasing. A capital investment of 50,000 euros is a lot more than committing 500 euros a month. This makes Care by Volvo especially attractive to younger people. Our Care by Volvo customers are 10 years younger than our typical customers. They normally have good jobs and a decent cash flow but they don’t have 50,000 euros to invest in a car.

You have said you want Care by Volvo to account for a quarter of all your sales. What are the numbers now?

We have a test in Germany where we want it to account for 5 percent. Right now we are maybe halfway there.

That’s a long way from 25 percent. Does that disappoint you?

That is why I would like to move faster. In Germany the target is 5 percent for this year. That doesn’t seem like much, but we expect it to grow quickly based on what we are hearing from customers. It could be like TVs or the Internet, which started off slowly but then grew very quickly.

 

Source: Automotive News Europe

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