Volvo's new owner and management team plan to spend heavily on the brand -- allowing the automaker's U.S. arm to ramp up leasing and spend more on advertising to reignite lackluster sales.
Volvo -- owned by China's Zhejiang Geely Holding Group Co. -- posted a 12 percent decline in U.S. sales last year, reflecting lower leasing activity and model changeovers.
Volvo's lease penetration was about 10 percent last year.
“We were running on a strategy that maintained margins at the expense of volume,” said Doug Speck, CEO of Volvo Cars of North America.
This month, Volvo began offering competitive lease rates -- such as $299 a month for 36 months with $1,995 down -- on the new S60 T5. The new leases, mainly on the S60 sedan and the XC60 crossover, should push Volvo's lease penetration to 20 to 30 percent of sales, which is still lower than the 40 to 50 percent lease penetration rate of rivals, Speck said.
He said Volvo likely will never reach lease penetration of 40 percent or more because buyers receive free scheduled maintenance for five years/60,000 miles. The maintenance program “makes buying a Volvo a very good value by comparison and will balance the percentage of what we do in leasing,” Speck said.
Volvo also will increase its advertising this year. he said spending in the first quarter alone will be “equal to the amount of money we spent last year.”
Ad spending will include TV, which Volvo used for only two weeks last year, to promote the new S60, Speck said.
Volvo expects a double-digit increase in sales in 2011 from 2010, when sales slipped to 53,948 units from 61,435 in 2009.
The new S60 and XC60 are expected to drive U.S. sales growth, Speck said.
He expects further sales growth from the XC60 because the 2011 model received an improved no-cost entertainment and navigation system, addressing customer requests.
Both vehicles are on the same platform developed by former owner Ford Motor Co., which completed the sale of Volvo to Geely in mid-2010.