Volvo’s New Small SUV, Sedan Likely To Appear Next Year.
Fruits Of Zhejiang Geely Holding Alliance.
Volvo Cars unveiled two new small SUV and hatchback design concepts as it bids to crank up long-term output and compete with the Germans, while Moody’s Investors Service said Volvo’s profitability will improve through 2017.
IHS Automotive said the new models, a compact SUV code-named 40.1 but which will likely appear as the XC40, and the hatchback called 40.2, likely to be the V40, will be built using engineering components developed with its Chinese owner Zhejiang Geely Holding Group. Geely bought Volvo from Ford Motor in 2010.
Volvo gave few details of the new vehicles but IHS Automotive said the XC40 likely will include a plug-in hybrid version which combines a 180-hp 1.5 liter three-cylinder turbocharged gasoline engine with a 74-hp electric motor and 9.7 kWh battery pack mounted in the center of the car. Battery-only range will be around 30 miles. This will have just front-wheel drive and a 7-speed automatic gearbox.
The XC40, likely to go on sale around the world next year, will compete with the Audi Q3, BMW X1, Mercedes GLA and Range Rover Evoque. IHS Automotive expects annual sales to peak at around 116,000.
The five-door V40 hatchback will probably include a fully-electric powertrain with a range of around 217 miles, IHS Automotive said. This will replace the current V40, which isn’t on sale in the U.S. This new one will be. Even though it will be a hatchback, the design will make it look more-sedan like. It will compete with the BMW 1 Series and Audi A3.
“Although it is not clear that the body shape will remain like this as it reaches production, it could hint at the prospect of multiple body styles for the standard car variant to appeal to the different markets that it is expected to be sold in. Indeed, while hatchbacks are the key body style for this category in Europe, sedans are more appealing in the U.S. and China, two markets where Volvo will be hoping this vehicle will be a hit,” IHS Automotive said.
It expects annual sales to peak at around 100,000.
Meanwhile Moody’s, in a credit report, said it expects Volvo profits to continue to grow at least until 2018.
In early May, Volvo reported operating profit of 341 million euros ($382 million) in the first quarter compared with a loss of 1.2 million euros ($1.4 million) in the same period of 2015 as sales rose to 121,000 vehicles. 20 per cent of those sales were of high profit margin big XC-90 SUVs, probably at the expense of Audi’s Q7 and BMW’s X5. Volvo has said it wants to raise annual sales to 800,000 from 2020, up from 503,000 in 2015.
Moody’s, in a first report on the company’s financial background since its 2010 takeover, said last year Volvo’s profit margin reached 3.9 per cent and could rise towards five per cent this year.
“These advances reflect notably higher volumes and favourable mix effects, and Moody’s believes that Volvo Car will successfully sustain this forward momentum in the next 12 to 18 months, in the context of positive sales momentum in Western Europe, the U.S. and China,” it said.
Moody’s listed some reasons for its embrace of Volvo –
- Well known brand identity
- Global footprint growing in China
- XC-90 boosting a wider range of successful new products
- Big spending on new engine family and efficient modular platforms
- Prudent financial policies and liquidity profile
Moody’s mentioned some possible negatives too –
- Volvo size modest compared with fierce global competition
- Low margin history
- Risky revival plan in the U.S.
- Execution risk of fast-paced model renewal
This is the first time Volvo has reported quarterly earnings since the takeover, leading to speculation that it was preparing the ground to tap the bond market for funds.
“We want to act as a listed company. For years Volvo has just been a division in someone else’s business. We want to be scrutinized as a listed company would,” Volvo CEO Hakan Samuelson told the Financial Times.