It’s an interesting time to be an automaker. Some are doubling down on SUVs, some are focusing on autonomy or electrification, and others are focusing on connectivity and new ways to buy and sell cars. Volvo, meanwhile, seems to be doing a little bit of everything. MotorTrend, along with a handful of other journalists, joined Volvo global CEO Hakan Samuelsson and Americas chief Anders Gustafsson at the automaker’s car-less (really) stand at the Los Angeles auto show to chat about Volvo’s electrification strategy and its Care by Volvo subscription program.
Volvo has finally finished revamping its lineup, and now the XC90 is the oldest vehicle in the U.S. range. Now that that cycle has been completed, are you planning on refining those models, or are you planning on expanding into niche markets like the German luxury automakers?
Hakan Samuelsson: I don’t think customers are expecting us to expand. I think we have very attractive body shapes; three-quarters or more are SUVs, highly popular on the market, and then we have very good sedans also within the U.S. So, I think we have the body shapes [that customers desire].
Our customers now expect first to have a car available with full electric propulsion and secondly, with a lot of new connectivity features and in-car infotainment features, which we’re talking about here at this show. That is more important than new body shapes.
Speaking of electric vehicles, do you envision Volvo’s lineup to offer electric versions of each car, or will you have electric-only models like the coming Polestar?
Samuelsson: Because we want to electrify very rapidly we cannot just add bespoke cars. There will be an electric powertrain option in all of our cars and that’s more important than new body shapes. [By 2025] all cars will offer an all-electric powertrain. We anticipate half of the car customers will choose that, and the other half will opt for hybrid gas-electric powertrains. Those will be the two, hybrid or [full] electric.
All of the SPA-platform vehicles (aside from the wagons) have plug-in hybrid options currently. How long until the XC40 plug-in makes its way here?
Samuelsson: [Because it’s on the smaller CMA platform] it’s an all-new concept with a new gearbox, front wheel power pack—and simply, it’s not ready. We are now selling it in some countries, but we will ramp up [production] in the future. It’s the piece we are missing and it will come [to America].
How will you differentiate between Volvo and the coming all-electric Polestar?
Samuelsson: [Volvo is about] safety, the environment, and smart, intuitive functionality [with] great Scandinavian design. With Polestar, we are really doing a sort of special electric car with the special body shape, really leading the way, creating a very attractive car which could spearhead electrification. We divide the cost [with Polestar], but we developed together and then [what we learned] is carried back into Volvos. That’s the [plan]. So Polestar will more be pure, all-electric, progressive, with the latest connectivity, and in-car infotainment.
The Care by Volvo subscription service is now almost a year old. What are some early lessons you’ve learned?
Anders Gustafsson: You know, we have learned a lot in the last nine months and, in February, we are going to launch the next [version] of Care by Volvo, because 50 percent of the cars are subscribed through the mobile phone and I would say [that was not expected].
We’ve also been waiting to get the license in every state. Last week, we’ve received [approval] for the state of New York and now we have a solution that simplifies a lot of the processes. Before, we were forced to divide the customers into different states, different groups and it was quite complicated.
Volvo is limiting subscriptions on the XC40 to 15 percent. Are you planning on limiting subscriptions on the S60 as well?
Gustafsson: That is just on XC40. That is [a lot of global demand] on that car, so [it’s a unique case]. On the S60, we don’t have any restrictions, and based on our [new South Carolina] plant, it’s a little bit easier [to meet demand]. We think [subscriptions are] going to be 15 percent on S60.
How many subscribers do you currently have?
Gustafsson: We’re always mentioning percentage, because when you go into a subscription process, you need to go through this beautiful country’s [state-by-state] insurance policies and [so we’re limited by that] not based on our capabilities. I would say, without the processes of the states, I would say we easily reached 10,000 cars because a lot of U.S. customers would like to get the car a la minute.
When they see the XC40, they would like to get the car within three days [of subscribing] and that is not the situation right now. We cannot deliver that. But with S60, after I would say February, I think the number will be quite big.
How have your dealers reacted to Care by Volvo?
Gustafsson: I’ve been involved with a lot of discussions with our retailers because they’ve been very, very nervous. They are still nervous, but trust is something that you need to fight for and we have a good relationship with them. This is something we should do together, but they also need to stretch their view on the industry a little bit. And that’s our job. It’s tough to change this industry, it’s much easier to talk about the metal and the engines and then leave it at that. This is a little bit different and I will say, as we sit here, in every interview, everyone is asking questions about Care by Volvo. I think that is a success, because the industry needs to take steps, because consumers are not super happy today. We know that.
Samuelsson: I was surprised with the very high percentage conquest. I mean, it’s obvious we’re reaching new customer groups, which are much younger—10 years younger [than our average buyer]. So, I think that’s very encouraging. It’s not just the body shape of the XC40 [that’s selling], it’s also the program as such.
Do you know how many current subscribers are getting ready to turn in their cars as the first year ends?
Gustafsson: We’re getting closer and closer [to that time]. Now, [our subscribers] average six months in.
We have just done a survey and I would say, some of them will change, especially in the metro areas, especially now that we launched the S60. The S60 attracts a younger audience. I think it was the same with the XC40, but I think S60 sticks out a little bit. When we launched S60 in the U.S., Hakan told me, “Anders, I don’t want to have a rental car. I want the best, I want high-spec cars and cars that will stick out!” and I think we can see that [decision is paying off]. Give me four more months then I will have an answer to that question.
I do talk to 10 Care by Volvo customers every week, because I need to know [what they think]. I cannot wait for surveys and of course they are shocked when I call them. Sometimes they complain for 20 minutes about something—that’s how it is—but I try to convert them. But with the majority, they’re so happy. So, it’s quite good, [especially because] it’s not always fun to change a car, because you [have to] get to know the new car.
Samuelsson: I think that’s a very important point, because there has been many subscription programs which are very much focused on these people who absolutely want to change cars as much as a shirt. I mean, that’s not the beauty of Care by Volvo. It’s more of an asset for you.
I have had company cars for many years, but I don’t really appreciate that my one year goes very fast. If I’m happy with the car, I want to keep it so I don’t have to empty the glove box. So, [the ability to change cars every year shouldn’t be the focus]; I don’t think that is the most attractive part of the program, but let’s see.
Gustafsson: I would say that with XC40, if I use my finance head, I would be happy if they change the car the first year, because the car is brand new. The profit around it is [high on the certified pre-owned market].
Are you worried at all about taking hits to residual values as cars come off of subscriptions?
Gustafsson: For XC40, it’s not a problem. But I will say, after two years, we need to be very cautious. [From there] we get into the guidance that I received from my boss: Don’t build ugly cars because we need to pay for that after three years [when the car is no longer new].
The profit on some of the first subscribers, the first launched cars, it’s not going to be maybe the highest margin on earth, but it’s going to be okay. But in the long run, based on loyalty and them staying in the family, we’re going to make good money and that’s the whole idea. So, I think just to simplify the [answer], I would say that right now we sell 5 percent of our volume to rental companies. And that is quite low if you compare to other car manufacturers and I would say in the future we won’t need that. I would take the 5 percent, put them into Care by Volvo and then I will clear up 5 percent of the mess, because normally the rental business destroys our residuals one way or another.
If we could touch on safety real quick—many mainstream automakers, such as Honda, are making their most advanced active safety systems standard. With safety being a key Volvo value, will we reach a point where your Pro-Pilot Assist technology is standard on all new Volvos?
Gustafsson: I would say if you ask Hakan, he would say, “Of course.” I think [the more] safety features the better. Right now it’s like a Christmas table in Sweden—you eat so much you cannot really sleep. Now, our cars are so good, with so many features, so let’s stop it there and then let’s see what the competitors are doing, because this is a tough market. We’re learning, but I would say, your questions hit directly where it hurts a little bit and we need to behave.
Samuelsson: I think it’s very important to deliver your brand expectations. That’s where I think it’s going to be proportionate to profitability.
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