Volvo’s out to drive a hard deal

DubaiVolvo wants a seat at the high table among luxury carmakers ... and in the S90 they may just have the perfect set of credentials for an invite. Launched in the UAE in October, its top-end sedan brandishes a brand new grille and a lot more to take on...

Volvo’s out to drive a hard deal

Dubai

Volvo wants a seat at the high table among luxury carmakers ... and in the S90 they may just have the perfect set of credentials for an invite. Launched in the UAE in October, its top-end sedan brandishes a brand new grille and a lot more to take on the German supremacy in the category. And Volvo ticks an important box by maintaining a price range of Dh189,900 to Dh279,999, below what the competition have tagged on for their flagship versions.

With good reason too — the Swedish brand, owned by China’s Zheijang Geely Holding Group, is intent on winning over a new generation of buyers and market share in the UAE. “Here, our share is 1.6 per cent within the luxury category — our global strategy is a 10 per cent segment share,” said Emre Karaer, General Manager — Volvo Cars MENA and CIS. “In Europe, we are at 15-20 per cent; in Morocco and Lebanon, it’s 10 per cent and above. I think we can expect 8-10 per cent in the UAE by 2020-21.”

Is the pricing on the S90 then a calculated gamble to woo prospective buyers? “There is no gamble in our business — everything is worked on segments,” said Karaer. “We look at the spec-adjusted pricing and if you are in a position where the brand has strength, that dictates what you do. We carry some currency risk ... our pricing is determined by the marketplace. And, periodically, we check the market if we are still competitive.”

Volvo improved upon its sales last year, in what was an exceptionally difficult year for the local auto market. The expected fourth quarter bump in sales did not materialise for most dealerships, as consumers held back going in for new purchases in an uncertain economy.

For Volvo, the XC90 and XC60 SUVs were the best-performing models, so much so they contribute 75 per cent of local sales. And the profit margins on these SUVs are quite welcome.

“We need that kind of margin because we are continuously investing — $11 billion to bring out the new cars,” said Karaer. “Sales growth has to come with profitability because we are going to be a listed company. In the latest financials, we improved operating margins to 6 per cent from 4.1 per cent. Our target is 8 per cent by 2020.

“Last year, we improved segment share in every single market (excluding Saudi Arabia) in the Middle East. While the overall premium segment dropped by 21 per cent in these markets, we grew 14.4 per cent.”

Volvo will soon have a brand new importer covering all three regions in Saudi Arabia. “We haven’t performed well in that market — that’s going to change,” Karaer added.

With Zheijang Geely Holding Group providing the financial base, Volvo is seeing through a gradual overhaul of its line-up. First off the blocks was the XC90 and that proved to be a hit in all the key territories where it sells.

Then followed the retuning of the sedan range, starting with the introduction of the S90, which has on board a T6 2.0l four-cylinder (turbo and Supercharged). It can belt out 320-hp at 400-Nm, and does the 0-100 kph in a fairly nifty 5.9 seconds. (The 90 range also includes the V90 and V90 Cross Country.)

Next up from the production line will be the all-new XC60 this month, and with the regional availability set for Q4-17. “By 2020, XC90 will be the oldest car in our showroom,” said Karaer. “We have renewed the 90 cluster and now, we move to the 60 and then 40.

“Volvo’s strategy is to go up in premium. The current XC60 is the old dynasty. The new will, naturally, be more expensive.

“And there might always be new products. In Europe, you see the C segment and sedan sales dropping; in the US, it’s the same and the shift is happening from large SUVs to the smaller. The SUV penetration is increasing.

“Now we have three home markets — Europe, China and the US. Last year, we had 18 per cent year-on-year growth in the US. In China, it was 11.5 per cent and globally, it was 6.6 per cent.

“Even in Europe, there was still growth even though these are mature markets. The US and China are key to our future position. If we want to grow, we have to do it there.” 

Fact Box

The chances of an immediate turnaround for car sales in the UAE are a bit hazy. “From our perspective, it was tough in 2016 and that state of affairs continues,” said Mohammad Maktari, Managing Director at Trading Enterprises. “Historically, huge amounts of car re-exports happen in the UAE, and some of the premium auto brands might be relying on shipping - even by up to 50 per cent - to other markets in the region. Some dealers might say last year was really tough. Others might say they have high stock levels and some that it was even a wonderful year. I would say it was a mixed.”

Fact Box

The chances of an immediate turnaround for car sales in the UAE are a bit hazy. “From our perspective, it was tough in 2016 and that state of affairs continues,” said Mohammad Maktari, Managing Director at Trading Enterprises. “Historically, huge amounts of car re-exports happen in the UAE, and some of the premium auto brands might be relying on shipping - even by up to 50 per cent - to other markets in the region. Some dealers might say last year was really tough. Others might say they have high stock levels and some that it was even a wonderful year. I would say it was a mixed.”

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