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Volvo's Future: SUVs, Premium Offerings, and Smaller Engines

Motor City Blogman

Whatever you may think of the ownership of Volvo by China's Geely Holdings, the automaker has a future as a Swedish company continuing to build cars in Sweden, in much the same way Jaguars and Land Rovers remain British and made in Britain while being owned India's Tata Motors.

It's not a true apples-to-apples comparison though, because JLR hasn't added any production in India. Volvo has been and will continue to build the first-generation XC90 in China, even as the all-new 2016 Volvo XC90 (pictured here) comes online. It will also build the long-wheelbase S60L there, but with one key difference. At the new 2016 Volvo XC90's launch in Artipelag, Sweden, last month, CEO Hakan Samuelsson said the S60L will be also imported to the U.S. from China starting next year.

Then there's the Volvo CMA platform for its cars smaller than the 60-series, which Volvo will share with the parent company. In the future, Samuelsson says, Geely will be to Volvo what Skoda is to Volkswagen Group's Audi - similar cars, different badges. The two brands also are likely to share Volvo's upcoming 1.5L three-cylinder engine, which is based on Volvo's new MTZ modular engine platform that consists of 2.0L turbocharged gas and turbodiesel fours. Engines 2.0-liters or smaller in size are optimum for China, in large part to avoid the punitive taxes levied on higher displacement engines there.

In addition, by restricting the cylinder count to four, the MTZ engine family "enables a small engine bay, making room for advanced front wheel suspension with world-class handling, a short front vehicle overhang and increased safety performance," (especially for pedestrian protection), Volvo says. The flagship engine for the new 2016 Volvo XC90 is a supercharged/turbocharged 2.0L rated 316 horsepower and 295 pound-feet, and it premiers in the limited First Edition of the SUV.

The four-banger is also a key component to achieving longitudinal-engine, rear-wheel-drive proportions on its upcoming larger cars, all of which will retain their transverse-engine, front-drive layouts. Though not as evident on an SUV, the layout is important for passenger car proportions, says Peter Mertens, Volvo's senior vice president of r&d.

"It actually starts with the position of the engine," Mertens says. "We call it center of wheel, ball of foot; by that measure you define the architecture, then you have the wheelbase, then you have the heights and widths. Everything in that architecture is completely flexible, you can do everything you want, except that ball of foot. The trick is to put the wheels under the engine as far as possible." |

Will Volvo sell cars with 3-cylinder engines in the U.S.? "It's too early to talk about," Samuelsson says, though certainly if it can sell the big, seven-passenger XC90 only with four-bangers here, smaller three-cylinder models are viable, even for a brand determined to make its premium image stick. Another executive in the engineering department says that Volvo has no plans to bring the turbodiesel version of the new 4-cylinder to the U.S.

Goals are lofty, but soft

A few years after a kerfuffle between Volvo management and Geely CEO Li Shu Fu over the Swedish brand's positioning, the direction remains premium, offering Mercedes-Benz/BMW/Audi levels of luxury and of safety at a "value" premium price. Volvo expects to sell about 470,000 units globally this year. The goal is to reach 800,000 globally by 2020, including 200,000 built and sold in China.

The target is 100,000 per year in the U.S., another lofty goal considering the number was 61,213 in 2013. Samuelsson says Volvo's lack of a captive financing arm in the U.S. hurt sales after 2008, though certainly there have been even fewer resources, such as marketing, since Ford sold Volvo to Geely in 2010 for just $1.8 billion, about 11 years after Ford paid $6.45 billion for it. Samuelsson expects about one-third of XC90 production -- 50,000 per year at first and ramping up to about 80,000 - to be sold here. These goals are soft, however.

"We don't have a target where we believe our company has to be absolutely bigger," he says. "We don't believe in that. We believe our company has to deliver attractive products, and we should have a strong and very attractive organization for future talent to work in, giving room for flexibility and creativity."

After dropping wagons from the U.S. market, then adding them back in again, Samuelsson doesn't see them as the heart of Volvo's market here. The wagon Volvo eventually brought to the U.S., the V60, suffers the problem any wagon faces; tough federal roof crush standards require structures that eat up lots of headroom in the space where a third-row seat would be. Therefore, Samuelsson and company are counting on its new, green, efficient, friendly looking, handsome XC90.

"Twenty years ago it was estates (wagons)," he says. "And now people have transformed to SUVs. As a driver, you feel very safe - it has excellent visibility."

So Volvo has a plan to regain its health in the U.S. and globally. Like Lincoln recently and Buick years ago, China will play a key role in that plan, though unlike the two American brands, Volvo can count on a Chinese owner that will to do what it takes, within reason, to help it get there. Volvo's Gothenburg headquarters remains in charge and in pretty good shape, with a series of premium models in the pipeline to help offset the high cost of Swedish production. Volvo has a far better chance of thriving as a medium-low volume niche premium brand under Geely than it did under Ford.

Geely has "chosen another governance model within the company than the previous owners," Samuelsson says. "They don't send in experts and controllers … They've chosen to let professionals from the board and the management (run it), and they have a burning interest and passion for cars. … So I think for the first time we are a standalone company."