With car sales flat, analysts warn, the automobile industry has likely experienced its moment of peak joy this trip around the merry-go-round. Once again, after an all-time record year in 2015, demand has been sated, and we more or less know what happens next. The car business is nothing if not cyclical.
So, cue increasingly desperate attempts to keep the showroom sales party going. Big incentives, the ones carmakers and dealers said they’d never resort to again, are back. Car loans are larger and longer-term than ever, while the “take” rate for leases — with their low, low monthly payments — has hit record levels. And carmakers’ naughty taste for subprime credit has returned with a vengeance, meaning pretty much anyone outside of a federal penitentiary can get a car loan nowadays, and, with a large-enough down payment, you can probably get one on the inside, too.
There are, however, a few firms bucking this trend of diminished expectations. One is the not very big Sino-Swedish Volvo Cars, a seeming oddity in that not very big carmakers weren’t supposed to be able to weather the tough business climate of the 21st century, or so the pundits told us. Yet sales are up strongly at Volvo — with U.S. volume almost 30 percent higher through July of this year. The impressive growth numbers owe not to the fact of Volvo starting a long march back from sales in the dumpster — worldwide sales of 503,000 actually set a record in 2015 — but to some seriously decent new product. The XC90 seven-seat crossover, a surprise critical success and sales home run, has led the charge, but with the plus-sized S90 sedan, V90 wagon, and a host of new smaller Cross Country models coming, desirable product all but guarantees Volvo a ride on the up escalator. A U.S. manufacturing plant, set to open in South Carolina in 2018, won’t hurt, either.
The company’s Swedish management says it will be content to reach 800,000 worldwide sales by 2020. That’s strong growth if still a humble ambition when you consider that Ford sells close to as many F-150s in one year in the U.S. alone. But you wouldn’t have known it was even a remote possibility from the depressive tone of the experts a few years back.
Many doubted not just the 75-year-old Swedish outfit’s viability but its continued relevance, which explained why Geely could buy the going concern for a paltry $1.8 billion.
Truth is, people have been loudly doubting Volvo’s ability to survive since the 1990s, yet somehow the firm has not just soldiered on, but also changed its path to one of growth, recovering market share and expanding it. One essential fact: There is now Zhejiang Geely Holding Group behind it, helping Volvo most obviously by enabling it to borrow $11 billion to fund future products. Before Geely, there was Ford Motor Co., which incinerated many billions on Volvo’s behalf between 1999 and 2010.
Not to get all sentimental, but these relatively benevolent stewards remind us that among the greatest gifts an automotive capitalist might hope to leave behind for the world is the one that occurs when they rescue a brand of enduring quality and authenticity from being extinguished. A brand is a terrible thing to waste and an expensive one, especially in the automotive realm, where an ardent and dedicated following takes a lifetime to build and costs insert-number-here billions.
Volvo, like the not dissimilarly situated Jaguar Land Rover, was a very strong and emotionally evocative brand — and authentic in a most positive way. Its unique selling proposition: safety. Volvo owns safety. And in the car business, who wouldn’t want to own that? Yet when it became clear Ford was going to have to fire sale it as part of the larger-scale effort to avoid its own bankruptcy, many doubted not just the 75-year-old Swedish outfit’s viability but its continued relevance, which explained why Geely could buy the going concern for a paltry $1.8 billion. Which was always mystifying to me. All it was going to take for Volvo to stand on its own was good management and several billion bucks more.
Ford was not an insensitive caretaker, for a time providing the very deep pockets Volvo needed, just like Jaguar Land Rover deeply appreciated the check-writing abilities of Ford, BMW, and Tata, who may be the first and only of its investors to reap benefit.
This time around, the money for Volvo came from Geely, and it was good. Though some grumble about its long-term intentions, so far the Chinese firm with little experience in the car business appears to have exercised a light touch. The mostly Swedish management team seems as jolly as I’ve ever seen it — and very focused. And best of all, having just driven the new S90 sedan for a day in eastern Long Island, the product is easily good enough to underpin a renaissance.
Across its range, Volvo will utilize a single, new four-cylinder engine family it has designed, with a three-cylinder variant coming, cleverly conserving funds while still offering — through different combinations of super-, turbo- and what I call super-duper-charging (both forms of forced induction at once) — several distinctly different profiles and personalities.
Exterior designs have been coherent and consistently handsome for some time at Volvo, as have interiors, but the new cars seem sharper than the ones they directly replace.
But the truly key expenditures, in my view, evidence in the quality and uniqueness of the materials found inside the new cars. Nothing moves a car upscale faster than when a manufacturer throws an extra $500 or $1,000 at an interior. Conversely, nothing moves it down market faster than an interior where cost has been conspicuously excised. You could ask Mercedes and BMW about their experiences earlier this century. Even more than quality engineering, an interior-materials upgrade was the magic carpet that carried Audi to near-luxury/luxury success. Volvo interiors now compete with the best. Racing to the top, rather than the bottom, it’s a novel concept, to be sure. But one that ought to be rewarded.