Volvo targets affordable luxury with all-new XC90

Volvo is primed and ready to make its comeback into the Sri Lankan automobile market following several years in the wilderness. Swedish Cars Ltd., a subsidiary of IWS Holdings, which secured exclusive importing and distribution rights of Volvo’s cars in August 2015, has announced that it is now now taking orders for Volvo’s all-new XC90 midsize luxury crossover SUV. 

The car will be available for purchase come August this year and will be unveiled to the Sri Lankan market alongside a new state-of-the-art 3S (Sales, Service, Spare parts) facility in Peliyagoda. The new one-stop facility, on Kandy Road near the Colombo-Katunayake Highway, will cover almost 20,000 square feet when complete, at a cost of $ 2 million. The Volvo Centre will showcase a six-car showroom equipped with a Volvo fitting lounge and customer lounge, providing customers with a unique and engaging Scandinavian experience.

Volvo’s re-emergence in the Sri Lankan market – it has sold less than 10 models in the past five years – follows its global resurgence since 2009 when it was taken over by Chinese automotive manufacturing company Geely. The seven years since have seen Volvo’s fortunes improve drastically, with heavy investment being made into newer models and factories, culminating in 2015 car sales topping 500,000 – the highest ever annual sales figures in Volvo’s history.

A large part of that was down to the success of its new luxurious yet affordable XC90, a midsize luxury crossover SUV with a two-litre four-cylinder engine and low fuel consumption, which has been receiving rave reviews and notably winning the prestigious North American Truck of the Year Award last year.

The Daily FT sat down with IWS Holdings Chairman Arthur Senanayake and Vice President-Asia Pacific for Volvo Cars Jari Kohonen to discuss Volvo’s global goals and objectives and what the Sri Lankan Volvo owner can now expect. Following are excerpts:

By Madushka Balasuriya

Q: With the exclusive dealership and distribution rights, will the whole Volvo range be available to the Sri Lankan market?

Jari Kohonen: A full line-up will be available, yes. It’s not going to be limited to only the new models.

Arthur Senanayake: Yes, we are going to bring several cars down, but right now on the new platform it is the XC90 and S90 models that are being offered. We are quite honoured and I feel this is the right time to secure this dealership agreement. Starting with the all-new XC90 and the S90, Volvo will be showcasing and rolling out its new technologies. Also, as all these cars are two litre cars, we have a tax advantage. Despite them being quite big, due to the technological advances, they post very good numbers with regard to fuel consumption. They also have very good horsepower.

 

Q: Could you elaborate on the tax advantages and what price we could expect the XC90 to be sold at?

Senanayake: Luxury cars this size usually come above the two-litre [engine] mark, which means a higher tax and subsequently a higher price. We can’t at the moment quote exactly how much it will cost in Sri Lanka because we’re not sure of the duty structure, which the Government needs to finalise. But we’re hoping to sell the cars around the Rs. 20-22 million range. 

Q: There’s of course a lower duty for electric cars. When can we expect to see a fully-electric Volvo?

Kohonen: We have a full electrification strategy in place. Today we have three models in which we offer plug-in hybrid variants: the all-new XC90 where we have the twin-engine T8 model, the S60 and the V60, which is the first diesel plug-in hybrid in the world. By 2019 we will have plug-in hybrid electric models for all our car lines plus one fully electric car as well. So we’re really moving in to that direction. 

Senanayake: And that’s the beauty of us [IWS Holdings] securing this franchise…

Kohonen: [laughs] Yeah the timing is masterful! 

Q: Volvo has seen a resurgence in the last seven years globally, what do you think that is down to?

Kohonen: It’s been quite a journey since the owner changed. We had to restart the company. We had ongoing contracts with the previous owner over which technologies we can use and from that day from when Geely took over Volvo has been very profitable. We had to move from yesterday’s technology to completely new technology and then the decision was taken to invest in a completely new middle-size and large car platform architecture the SPA (Scalable Product Architectures) where the XC90 is the first product to utilise this.

At the same time Volvo started developing and investing in completely new engine technology. There were some very visionary people in the company at the time, and they decided that we would downscale the engine size; it used to be 2.5 to 3 litre, 5-6 cylinder engines, now we have two litre engines with four cylinders, with absolutely fantastic performance. And if somebody says the performance of our four cylinder two-litre engine is not enough then we have the twin engine hybrid variant which is phenomenal. 

At the same time, downsizing and bringing in this new technology has meant that fuel consumption has also reduced. It’s been a really good exercise and it doesn’t affect the performance. For example, the new XC90 has won awards around the world such as the US Truck of the Year – the only model in the world that has won it twice. 

Q: Given the direction in which the global car and SUV market is heading, do you feel the perception of luxury is changing?

Kohonen: I think we are consistent in our thinking of luxury. Maybe execution hasn’t been perfect but the philosophy has been of Scandinavian luxury, which means it’s lifestyle and experience rather than having high performance or gadgets in the car. The experience of owning a car is pleasant and you feel you’re treated properly and the focus is on detail, quality and design elements.

If we were to use music terms; it would be pianissimo instead of forte. You just feel it when you go in the car and everything around you gives you that special feeling. You feel proud to own the car and drive it. It [the concept of luxury] has partly changed because quite a lot of our competitors have entered into the segments that have not been considered luxury segments. Moving from traditional rear wheel to front wheel and multi-purpose vehicle. It has become like that. Also the fierce competition that is there in this segment.

Q: You mentioned new technology, could you give some examples?

Kohonen: Keyless cars is one thing of course. One day it will be possible to use your mobile phone to open the doors and the technology is already there. But even more important for Volvo is the driver support system and moving towards autonomous driving. In fact in 2017 we will have the first 100 cars around the Gothenburg area piloting this technology, and the new XC90 already includes major parts of that technology, so with small adjustments it can be made to include autonomous driving. 

There have even been a number of demonstrations of several XC90s driving in a row autonomously. That is also one tool for us towards delivering our 2020 vision related to safety, which is that by 2020 nobody should be seriously injured or killed in a new Volvo car. We are heading in that direction, and autonomous driving and driver support systems are very important aspects for us in achieving that goal. To be clear, we’re not talking about driverless cars, it is just a support system to help the driver.

Q: There’s the petrol variant, the diesel variant and the hybrid variant which are going to be on sale this year. However, with the future pointing firmly towards electric cars, what is the potential re-sale value of a Volvo car at present?

Kohonen: That’s a question only the market can answer.

Q: Historically, what had the re-sale value of a Volvo been?

Kohonen: It depends on the market. You have different competitive sets and different preferences for every market. There is no one residual value.

 Q: Arthur, if you had to make an educated guess with regard to the Sri Lankan market?

Senanayake: I believe the Volvo will have a good market. The car is durable, it has a three-year comprehensive service package with the price of the car. The car has record safety standards and the new Volvo, I believe it’s stylish. In the Sri Lankan market there will be a good second hand market for it because they want to associate with the brand. It’s an affordable luxury. Colombo pricing that we have for a seven-seater Volvo is 20-22 million, which is about a third of some of its competitors. On top of that it has a better fuel economy. There is no big difference between a hybrid and the normal aspiration of a petrol car. So you don’t have to pay that extra amount of the hybrid. 

Kohonen: Yes, that’s taxation related; with the hybrid technology you have to pay a little more for it. But the hybrid twin engine and the XC90 is a very unique offer. It’s the only seven-seater size class with the plugin hybrid technology and that’s basically because of the battery not being in the rear part of the car but it is put in the centre of the car. So there’s more space in the rear and it’s also great from a safety point of view.

Q: The midsize luxury crossover SUV segment is very competitive. What is it that sets Volvo apart from the competition?

Kohonen: I think it’s our long-term vision of becoming the most progressive car brand in the industry, and it doesn’t mean that we would abandon the safety because it’s been an important element of the Volvo cars and it always will be. In 1927 when our founders started the company, they said that the cars are driven by people and therefore people should always be in the centre of whatever we do. Safety is a guiding principle of that. 

On top of that what we have been implementing and executing extremely well now is the Scandinavian definition of luxury. It is simple – whether we talk about exterior design, interior design or the materials that have been selected – we are protecting what is important for people, whether it is your personal safety, passenger safety or people outside of the car. We are taking care of the environmental aspect with the new engine technology. Not only that, our factories in Sweden run with renewable energy so the sustainability part is an important factor.

We want to make our customers feel special when they sit in the car. Again it comes from the Scandinavian luxury perspective of how we use the space and there is a great focus on detail. The way it has been executed is just fantastic. The third element is that we want to make life less complicated for people. The XC90 dashboard has eight buttons – everything else is behind the state-of-the-art HMI (Human Machine Interface), which is very user friendly and very easy to navigate. Competitors would average about 30 buttons, making life more complicated. We want to sell 800,000 cars by 2020 and that means that every year we need to improve and break records – and we are in good speed making that happen.

Senanayake: On the Volvo side, when it comes to the facility we’re building here, Volvo has a different way. The technician will be the first contact for the Volvo customer. One technician will look after that particular customer so that they can directly communicate with the technician if there is a situation. You don’t have to go through service reception. Interaction will be from the technician to the customer. This technician will be trained to handle that. We have to have intelligent, educated technicians for this.

Q: Can you tell us a bit more about the state-of-the-art facility that you›re building?

Senanayake: It’s a three-way facility. It’s all in one. You’ll have the showroom where the customer can see the car being serviced. There will be a separate area where the customer and the technician can talk and discuss about it properly and what he will require. A Volvo CI guideline on the latest technology.

Kohonen: What Arthur is describing is a part of the way we call Volvo, how we want the customers to experience our brand.

Senanayake: This is the first time I have heard of such a thing and it is very successful.

Kohonen: First of all this technician-customer interaction. It’s not an evolution of the industry but a revolution. Normally you have several layers between the customer and the technician. But the thinking is that there is no layers between information flow and where we have done this, we have seen very good results in customer satisfaction. It also improves employee satisfaction and employee retention. People tend to stay longer.

Senanayake: It’s a different status for the technician. It’s not just a technician who is full of oil. It is a very clean technician.

Kohonen: You should see pictures of how the new area of all the workshops. There’s a boy from the showrooms. We have a concept called ‘the living room’ where customers can come and sit and do their work and have a cup of coffee and from the living room they can see how the car is being prepared through the big window. Everything is clean, it’s a pure environment. It has nothing to do with greasy, dirty hands. It is completely new thinking on how to treat the customers and also the cars from that aspect.

Senanayake: This is going to be a world class hit for sure. I see many other companies following the Volvo way. The showroom is in town and the workshop is somewhere else. Many companies are in the same situation. Because of the environmental situation and urban development situation cars have been there for years and years but they’ve always had the showroom in town and workshop there. Companies which had the workshop and showroom in the city have been asked to move the workshop out because of the grease, the oil when you wash the car and the rain comes, it goes into the drains on the roadside. We have moved out and it’s close by here and in the vicinity. We will launch in August.

Q: Post-launch, what are your expectations of the Sri Lankan market?

Kohonen: For us it’s a topic of high importance that we have the right partner and our discussions started about three years ago. It is a long process. We do a lot of dating before we enter into the more serious stage in the cooperation. In this case we have had several good candidates and we believe we have found the best. We have signed a contract with the best one.

Q: What’s the best case scenario as far as total price in Sri Lanka that we can expect for the XC90?

Senanayake: If the imported price comes it will be below 20 million, if not it will be about 23 million. We would like the Government to follow international standards of using manufacturer’s invoice. The manufacturers know the price. If you want to have a transparent system, it has to be the manufacturer’s invoice. People like Volvo, Mercedes, BMW Porsche, Land Rover – if they give a manufacturer’s invoice, it will be a very transparent thing. If any of those companies import through a third party, it is not transparent.

Pix by Kithsiri De Mel