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XC-90 Faces Harsh Competition From Germans, Range Rover

Biggest Market Will China; Will U.S. Share Be Retrieved?

Volvo launched its second-generation top-of-the-range XC-90 SUV, and experts say its success is crucial for the future of the company, but aren’t sure if it can withstand keen competition from Audi, BMW and Mercedes.

XC-90 Faces Harsh Competition From Germans, Range Rover

The previous and unmistakeable XC-90 hadn’t been upgraded since 2002, by which time parent company Volvo was sold by Ford Motor Co to China’s Zhejiang Geely Holding Group. The new XC-90 is arguably blander and looks bigger than the previous model, but is designed to appeal to buyers in its biggest market, China.

Volvo took three years to develop the new XC-90, as part of the $11 billion new vehicle investment programme. The XC-90 uses Volvo’s new Scalable Product Architecture, which will underpin all future Volvos, except for a new generation of small cars being developed by Geely.

Volvo boasts about the XC-90’s new safety technology, more fuel- efficient engines and improved premium interior. One safety feature of which Volvo is most proud is a new function that allows the XC-90 to automatically follow the vehicle ahead in stop-go traffic, which is a stepping stone to fully autonomous vehicles. Motors include a 2.0 litre four-cylinder petrol or diesel unit which will be available with supercharging, turbo-charging, or with a plug-in hybrid. The latter will offer CO2 emissions of around 60 g/km.

But will it sell?

IHS Automotive analyst Ian Fletcher says the jury is out, with the majority of the expected 65,000 annual peak sales happening in China.

“We currently do not expect the vehicle to repeat the popularity of the first generation in markets such as North America and Europe due to how crowded this playing field now is. It remains to be seen whether consumers respond well to the brand’s new direction; if it is successful, it could bode well for its further new launches in the future,” Fletcher said.

Increasing competition
Fletcher said the main competition was from BMW, Audi and Mercedes, but pointed out the increasing pressure from the Range Rover Sport and Land Rover Discovery, the Porsche Cayenne and Volkswagen Touareg.

International Strategy and Investment (ISI) was a bit sceptical too.

“It remains everybody’s guess if Volvo will ever be able to regain the share it has lost in the U.S. market, yet with the XC-90 to be launched later this year the competition in the full size SUV segment will be stepping up again,” said ISI analyst Arndt Ellinghorst.

Volvo sales in the U.S. have fallen by about half from their level 10 years ago to just over 61,000 last year. Volvo plans to nearly double annual sales to 800,000 by 2020. In the first half of 2014 Volvo reported an operating profit of $176.5 million, compared with a loss in the same period of 2013 of $83 million.

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