Taking Audi’s engineering as an inspiration (front and four-wheel drive, five-cylinder engines in 10v and 20v form), Volvo planned to modernise its image and engineering, and head upmarket. But two decades on, its global sales are stuck at around 420,000. And even board members lament that its customer base still wants simple, unflashy, reliable cars.
A decade of mould-breaking design has failed to change perceptions when faced with the longevity of 240 and 700 and 900-series estate cars, which still litter the streets in key markets like the UK and California.
Volvo’s ad campaigns also bravely – and cleverly - try and sex up the company’s load-lugging image by spinning it out as the brand of choice for cool outdoorsy types. When the reality, for the V70, is probably more prosaic. But the image shift has proved elusive.
So, despite interest in Volvo from developing market companies, Ford isn’t going to sell its Swedish subsidiary. Instead, Ford HQ is going to send in its best brains from its highly successful European arm to rethink Volvo’s failing drive upmarket.
Despite its best efforts over the last decade or so, it looks like Volvo has not properly bridged the premium gap. XC90 aside, it cannot get customers to spend big money on its models. One Volvo boss told me that he wished he had BMW’s customers, who would tick all the options boxes and update their car every couple of years.
Volvo’s ambition to charge, say, Audi prices is probably is unfulfilled. In truth, the company is caught dangling between the two main markets: premium and upmarket mainstream.
For example, today’s base diesel V70 costs £25k. Compare that to a £27k base model diesel Audi A6 Avant and an equivalent VW Passat estate at just over £19k. Both outsell the V70.
In future Volvo will have to work more closely with Ford on its models, saving money by reducing the amount of unique engineering. And that would allow the showroom prices to fall so they are just a bit more expensive than VW.
Making future products more closely related to Ford models, also opens up the possibility of building Volvos in Ford’s US factories, something that would result in transformation of profit margins in the US market.
The upshot is that Ford wants to see annual output boosted to 600,000 units and beyond. Losing some autonomy will be the price Volvo pays to get back into the black.