Volvo Had A Very Big Year

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Volvo’s basic proposition that it will give you a big, safe, extremely comfortable car — that by the way, also costs a bit less than the German competitors — has always felt savvy, since there isn’t much point in challenging BMW or Mercedes on volume. It also works: Volvo had record profits in the second half of last year.

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From the Financial Times on Wednesday:

Although full-year sales and profits dropped, the second-half performance was far better than the first.

For the second half of the year, the Geely-owned carmaker posted SKr9.5bn ($1.1bn) of operating profit and SKr151bn of sales, both records for any six-month period. Net income for the period was SKr9bn, 44 per cent higher than the same period in 2019.

The vehicle maker booked a 6.3 per cent profit margin for the second half, achieving a long-held aim of hitting comparable levels with its German rivals, Daimler and BMW.

[...]

“It was the best half year ever, we saw a very impressive comeback especially in China and the US,” Volvo Cars chief executive Hakan Samuelsson told the Financial Times.

Volvo wants to sell 800,000 cars globally this year, or more than double what it was selling 10 years ago when Geely bought Volvo from Ford for $1.8 billion, about 10 years after Ford had bought Volvo for $6.5 billion. I don’t know how much Volvo is worth now but I’d guess that Geely has been pretty happy with its purchase, and man, the Ford years just look worse and worse.

What has Geely done to be so successful? Not much, visibly, except leave people at Volvo alone to do what they do best.

News Editor at Jalopnik. 2008 Honda Fit Sport.

DISCUSSION

shanemorris
Shane Morris

Hear me out on this one.

Volvo isn’t competing with BMW, Mercedes and Audi. It feels that way to enthusiasts, because we remember the “fun ones” like the V70R, etc. But in reality, Volvo’s biggest competitor was Saab, and then it was... no one. (We miss you, Saab. We really do.)

Today, Volvo is competing with Subaru.

They both compete in the “we make safe family cars” brand-direction. I’d argue that Volvo has better styling and vastly nicer interiors, but to buyers in that segment, especially families... cost is king. Subaru has been able to “un-cheap” themselves by being something of an anti-status symbol. I know millionaires who drive a Subaru Outback, and I also know schoolteachers who drive a Subaru Outback. (Dead serious, one of my closest friends lives on a trust from a brand name his grandpa started back in the early 1900s. He’s... loaded. He drives 2016 Outback. The interior is covered in dog hair from his hound dog, Bo. Bo is a very good boy.)

I’d tend to argue that Subaru has becomes one of the strongest car brands in America, and their customer loyalty backs this up. The second thing they do well is supporting first time buyers with secondhand cars. If you aren’t a car person, Consumer Reports and the IIHS will tell you a 2013 Subaru Outback is the best car you can buy for under $10,000. (The Dodge Brothers were famous for being early advocates of helping first time buyers get used Dodge, and then keep them in the brand that way.)

What Volvo is left with are customers who aren’t the “outdoorsy Asheville/Austin/Portland types” and are less likely to have granola stuck in the fabric. They also need to pay a little bit of a premium to get into a Volvo. But if you do, it’s a great car.

It’s just going to be hard for Volvo to knock Subaru off their perch, because for all intents and purposes, they have become the “Lexus” to Subaru’s “Toyota”, for lack of a better analogy. Volvo is your Ralph Lauren khakis and the cashmere turtleneck. Subaru is jeans and a t-shirt.