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The pace of change at Volvo Cars will remain undiminished in coming years despite recent success in tripling its operating profit in 2015 to SEK6.6bn (~R12bn), Håkan Samuelsson, president and chief executive of the company has said.
Speaking at the 86th Geneva International Motor Show, Samuelsson said he was proud to have reported that Volvo’s operating profit margin increased from 1.6 per cent in 2014 to 4 per cent in 2015, but pointed out that this was around half the level being generated by its competitors in the premium segment.
“Volvo’s transformation is nowhere near complete. The company’s revitalisation has been effective so far, but work remains to be done and we are entirely focused on the future. The next stage in Volvo’s expansion will be even more exciting than the first,” he said.
Volvo is implementing a sweeping USD11bn transformation plan that has involved the development of its own modular vehicle architecture, a new engine range, global manufacturing capability, a completely renewed product range and world-leading developments in safety, autonomous driving and connectivity.
But Samuelsson made clear that despite these recent changes, the company retains an ambitious medium term expansion plan that will lead to an increase in sales, improved profitability, enhanced productivity and a position as one of the world’s leading premium car brands.
He listed the following areas, among others, to be the focus in coming years:
Products
The next stage in Volvo’s transformation will be driven by a completely renewed product portfolio.
Larger 90 series and 60 series cars will be built on the Scalable Product Architecture (SPA) architecture. It will also implement a global small car strategy, introducing the quality and technical sophistication that is available on SPA to smaller cars on the Compact Modular Architecture (CMA).
“Our new expanded global range of smaller cars will improve and broaden Volvo’s presence in an important and growing market segment,” said Samuelsson.
Sales
Volvo will continue to reposition its brand to compete with its global rivals, revive sales and operations in the US, continue to grow sales in China, double market share in Europe and overall reach sales of 800 000 cars globally.
“Both sales mix and profitability will improve as we roll out our new products,” said Samuelsson.
Manufacturing
Volvo’s plant in Torslanda, Sweden, will in future make its 90 series top of the range cars as well as next generation 60 series, while its plant in Ghent, Belgium, will become a purely CMA plant for new 40 series cars. A new plant in the US will become operational in 2018 and make 60 series SPA based cars. The plants in China will make cars for domestic use and for export.
“We are developing a global industrial footprint that will mean we will primarily build cars in the regions in which we sell them. This is not only more efficient, but also provides a natural currency hedge,” said Samuelsson.
Profitability
The company’s operating profit margin will double from today’s level and be brought in line with its competitors in the premium segment.
“This year will be another record year in terms of sales and profitability will also improve,” Samuelsson said.
Electrification
Volvo will also position itself as a leading global maker of electrified vehicles, a series of four and three cylinder plug-in “Twin Engine” cars, offering world-beating combinations of power and low emissions. Every range of cars it sells will have this option. It will also develop a new all-electric car by 2019.
“At least 10 per cent of annual sales will be electrified vehicles in the medium term,” said Samuelsson.
Autonomous Driving
Volvo will start one of the world’s most advanced and ambitious autonomous driving vehicle tests in Gothenburg, in 2017, with 100 real customers using autonomous Volvos in everyday life, paving the way for the company to entrench its position as a global leader in autonomous driving technologies.
“We have stated that by 2020 no one should be seriously injured or killed in a new Volvo car. Autonomous driving is one key path to achieving this vision,” said Samuelsson.
Costs
At the same time as revenues and profits are rising at Volvo, the company will retain a relentless focus on costs in order to ensure that it achieves its ambition of increasing its operating profit.
“We will grow, but we will not grow fat,” concluded Samuelsson. “Improving productivity is always a priority. We have come a long way in the last five years, but we still have a long way to go.”
