Cologne Volvo makes itself small. The Swedish automaker wants to introduce an electric “Baby Volvo” next year, which will be offered below the existing model range in terms of size. So far, the C40 is the smallest model from Sweden with a length of 4.44 meters.
In an interview with journalists, Volvo CEO Jim Rowan confirmed the planned expansion of the model portfolio. The Swedish company wants to massively increase its sales by 2025. The entry-level SUV plays a key role in this.
“The little one will be a very important car for us,” Rowan said at the press briefing. With the new model, Volvo will achieve its planned volume targets. The subsidiary of the Chinese Geely Group plans to sell 1.2 million cars a year by the middle of the current decade. That is about 70 percent more than in 2021; last year Volvo sold around 700,000 vehicles.
For the production of the new small electric model, which should be called “EX30” based on the existing vehicle range, Volvo uses a platform from the Chinese parent company Geely. The car is also expected to be manufactured in China. Mercedes uses the same platform for the new Smart #1, which the Stuttgart group produces in a joint project with Geely. With a length of 4.27 meters, the Smart model is about as long as a VW Golf 8.
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The new SUV from Smart is offered in Germany as a basic model for just over 40,000 euros – a possible guideline for the planned Volvo.
With the small SUV, Volvo could return to the entry-level segment. Volvo only discontinued the V40 in 2019 and thus withdrew from the compact class. The return with Chinese help should be more successful: the planned “Baby-Volvo” could become the brand’s most important model in just a few years, hopes in Gothenburg.
Volvo can fall back on Porsche experience
An example that such an extension can work comes from Germany. Almost ten years ago, with the SUV Macan, Porsche launched a model below the existing product range. With around 100,000 units per year, the car is now the most important model of the sports car brand in terms of volume.
Volvo boss Rowan believes that the Swedish manufacturer’s customers will also accept such a downward extension. “Our brand can handle such a model portfolio,” he said.
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With the new small SUV, Volvo Cars also wants to try new sales channels. CEO Rowan announced that the car should primarily be offered as a subscription and not for classic purchase. Volvo would then rent its new model to its customers for a monthly rate, 600 to 700 euros for such a vehicle should be realistic.
With this changed financing model, Volvo could open up new customer groups, Rowan hopes. Several 10,000 euros for a new car act as a deterrent per se. According to Rowan, the subscription model makes it easier to appeal to younger customers. The starting age of Volvo buyers will be reduced by about ten years. According to a study by Nuremberg market research company Puls, the average German buyer of a Volvo at 47 is older than BMW, Audi or Mercedes customers.
Tough competition in electric cars
In financial circles, however, there is skepticism as to whether the new entry-level model can bring rapid success. “Competition in the small electric SUV segment is becoming increasingly intense,” said UBS analyst David Lesne. This is especially true for the Chinese market, where Volvo also wants to offer the new little one. All manufacturers would also have to be prepared for the fact that demand will drop noticeably next year. That also applies to Volvo.
Volvo boss Rowan was still confident. Volvo will remain undeterred in its electrification strategy. “The battery drive offers a much better technology than the combustion engine,” he emphasized. The high energy efficiency of more than 90 percent, which is significantly higher than the value of the combustion engine, also speaks in favor of the electric drive. By 2030, the Swedish manufacturer wants to bring an additional electric model onto the market every year. Recently the new electric “EX90” is available, Volvo’s big expensive flagship.
>> Read about this: Everything new for the Swedish flagship – the Volvo EX90 can do that
Despite the recent sharp price increases when purchasing raw materials for the battery, Volvo believes that in the future it will be possible to make more money with electric cars than with traditional combustion models. In addition, Volvo can increasingly use synergies within the Geely Group. The Swedish car manufacturer wants to achieve a return of between eight and ten percent in the future with a growing proportion of electric vehicles. Last year, the operating margin was 7.2 percent.
Volvo misses targets for 2022
According to Rowan, Volvo has good prospects of asserting itself in the highly competitive premium segment. The brand core of the Swedish manufacturer contributes particularly to this. Volvo focuses on sustainability and safety, which sets it apart from other manufacturers of premium cars.
For the current year, however, Volvo has to accept setbacks. The carmaker is particularly affected by the ongoing lockdowns in China and is therefore unable to sell cars to the planned extent. Global sales will remain noticeably below the 2021 level. Market observers are now calculating with around 600,000 vehicles sold.
More: German electric cars are punished in China