Unfortunately, another automobile icon is following its Swedish counterpart (SAAB) down the slippery slope to oblivion. Once upon a time the 87-year old Volvo brand enjoyed the reputation of being the safest car on the U.S. market and families were paying a premium for that feature.
The brand's decline began when it came under the Ford Motor Company umbrella and then was sold to China’s Zhejiang Geely Holding Company in 2010. During the last 10 years sales of Volvo’s in the U.S. have dropped from a high of 139,384 cars in 2004 to 61,233 last year, and down another 11% so far in 2014 while the overall car market had its best year since 2006. A Volvo dealer in New Jersey who was selling about 900 Volvo’s a year before the recession now only sells about 600 annually.
While Geely has invested more than $10 Billion in upgrading Volvo model and specifically the XC90 sports utility vehicle, the U.S. market for this type automobile has been overtaken by Audi (Q7), and BMW (X5). Priced between $65,000 and $135,000 the new Volvo model “made in China” doesn’t stand much of a chance coming late to the market with a noncompetitive price.
Volvo has struggled to maintain profitability and only eked out a 1.6% operating margin last year in comparison to the much greater margins of other luxury car competitors.
While Geely has ambitious plans for overhauling the entire Volvo line and introducing smaller Volvo models, time is running out, along with their money, while the market continues to move on. Marketing is the battle for the customers mind and unfortunately the Volvo brand is rapidly losing whatever “share of mind” it enjoyed historically.
If it survives at all it will be as a much smaller niche player in a very large global market flooded with many other more popular brands.