Volvo's U.S. sales recovered from last year's pandemic-induced shutdown faster than those of its European competitors and the overall industry.
Sales rebounded from the COVID-19 slump in June, and the Swedish automaker closed the year with sales up 1.8 percent — one of only three automakers to end the year in positive territory.
Last year was a strong profit and volume year, Volvo Retail Advisory Board Chairman Ernie Norcross, 59, told Automotive News.
But Volvo dealers shouldn't expect to rest on their laurels.
The sales target for 2021 is expected to be 10 to 15 percent higher, said Norcross, owner of Volvo Cars Memphis in Tennessee.
Fresh product on the horizon, coupled with improving consumer sentiment in the wake of a COVID-19 vaccine has Norcross optimistic that Volvo dealers can deliver on the higher sales expectations.
"We have to take the same attitude that we had in 2020 into 2021," Norcross said. "There is a lot of growth opportunity and we have to go on the offense in going after that business."
One of those opportunities is Volvo's push into electric vehicles.
This year, the automaker will launch its first battery-powered model, the XC40 Recharge P8. The compact crossover foreshadows an ambitious bet — Volvo wants battery-powered vehicles to account for half of its global sales by 2025.
Faced with tightening emissions requirements in Europe and China, the auto industry is foisting fleets of EVs on the market. But in the U.S. at least, consumer appetite for this new powertrain is uncertain.
That makes electrification a high-stakes bet for Volvo's 281 U.S. dealers, who must invest tens of thousands of dollars in dealership upgrades to sell and service electric vehicles.
Norcross spoke with Staff Reporter Urvaksh Karkaria about the products, challenges and opportunities Volvo dealers should expect this year. Here are edited excerpts.
Q: Volvo sales weathered the COVID-19 pandemic better than most other luxury brands. What would you attribute that to?
A: Early in the pandemic, [Volvo Car USA CEO Anders Gustafsson] allowed the regional vice presidents autonomy in running their regions. That boots-on-the-ground approach enabled Volvo to react quickly to local market conditions.
We prioritized safety. We had processes throughout the dealer network on how to clean cars and what the expectation was for the consumer — from leaving certain doors open within the facility to contactless vehicle pickup and delivery.
Volvo's management team reacted quickly to production shutdowns and did an excellent job moving inventory to where it was needed. There was almost overcommunication with the dealer network.
Volvo implemented relief measures for dealers, including sales bonuses and floorplan incentives, which helped dealers to be aggressive with chasing sales. We didn't have to go into a defensive mode. We stayed on offense and that translated into volume and in turn into profit.
What's the sales outlook for 2021?
The sales target this year is expected to increase by 10 percent to 15 percent.
With the opportunities ahead of us, 2021 will be another great year for us. Our product lineup is only getting better and the value of our offerings is resonating with consumers.
We would like Volvo to continue to aggressively bring fresh products to market and to ensure dealers have inventory.
Last year dealers urged Volvo to embrace digital retailing to stay ahead of startups such as Carvana. How has the pandemic reshaped auto retailing?
Volvo had prioritized digital retailing in 2019. We were in the right place at the right time.
The pandemic has accelerated the adoption of digital retailing by four or five years. Dealers who were on the fence with digital retailing got knocked off the fence with COVID-19 and decided they better get in the game because the consumer was shopping from home and wanted a seamless, consistent process.
Should automakers continue with their COVID-19-era digital offerings even after the pandemic is over?
We want to meet the consumer where they are at in the buying journey. Consumers are looking for price transparency and to get away from the negotiating process. Digital retail meets that consumer need.
What is Volvo doing to direct dealers on the digital retailing front?
Volvo is vetting digital retailing vendors and will negotiate a discount for their services. Our goal is consistency and transparency across the dealer network.
Do dealers prefer choosing their digital retailing tools from a third party, or is using an automaker's prescribed digital retailing tool helpful?
Dealers understand that the consumer wants a consistent brand experience. But dealers like that Volvo allows the network a choice in which vetted supplier they can use.
How much emphasis should be placed on eliminating wet-signature requirements in 2021?
The consumer is moving in that direction. We still have some banking requirements that prohibit 100 percent digital signature.
Has the pandemic resulted in any change in facility image programs?
Volvo has been consistent with its facility requirements. They have made no changes as it relates to the pandemic.
What do Volvo dealers want to see from Volvo regarding facility and image improvement programs?
Dealers continue to expect Volvo to find efficiencies and be sensible about facility size requirements, particularly with the likely increase in digital retailing. The retail advisory board is working with Volvo around electrification and what that means in terms of charging infrastructure and workshop requirements.
With the rise of digital retailing, what is the future of the physical dealership?
Dealers do not see an overnight dramatic change. We feel [the physical dealership] will continue to have its place in the ownership journey. As digitalization increases, the role of the brick-and-mortar store will evolve. As a brand, it's important that we support a seamless offline-online process.
Last year, Volvo made a push to increase dealer participation in the certified pre-owned program. How did that turn out?
Ninety-three percent of the network currently participates in the CPO program, up 5 percent from 2019. Annual CPO sales were up 11.6 percent over 2019, with Q4 setting an all-time record.
The CPO program is easy for dealers to get behind. It's affordable to put it on a car and consumers see the value in it. One of the biggest benefits of our CPO program is that all the returning leases stay within the Volvo dealer network.
Is Volvo looking into how it can assist dealers with selling used vehicles through a national platform, given the success of companies such as Carvana?
A national used-car platform is complicated when you have 281 independent dealers. It's easier for Carvana or CarMax to do because they don't have franchised dealers. They can move their cars around; they can do certain things.
Volvo has to work through its dealer network. Each dealer has different inventory responsibilities, different turn ratios and acquisition strategies.
How did salesperson productivity at Volvo dealerships do during the pandemic?
There's been a huge improvement. In December, we had two dealers that sold 250-plus vehicles. Their previous record was 175 and they didn't have that many more salespeople.
How was the fixed-operations business affected by the pandemic?
There was a dip in business in the March-April-May period and then it came storming back. When you increase your units in operations to the level we did — both through the CPO program and new-car volume — it's going to translate back to your fixed operations. During the pandemic, we focused on the Volvo on Call vehicle pickup and delivery service. It drove customers into the dealership and gave them peace of mind.
What were the most exciting products last year?
The compact crossover segment was on fire last year. We saw that in the sales of the XC40 crossover, which surged 35 percent year over year. The XC60 and XC90 crossovers also did well, delivering value in the premium segment.
Volvo will introduce a new model — the C40 coupe-like crossover — this year. What are your expectations for the vehicle?
It's a great-looking vehicle and it's going to hit right where we need it to. We haven't had a small crossover and consumers have asked for that. It's an entry-level [model] into the brand and it's going to be able to marry people into the brand.
What is missing in the Volvo product lineup?
We'd like to see a larger SUV. The XC90 fits very comfortably in the seven-passenger segment. But there is a desire by the consumer for a larger family vehicle. It would allow Volvo to compete with the Mercedes-Benz GLS and BMW X7.
A large SUV would also offer greater profit opportunities for dealers.
Does the Volvo brand have too many sedan models in the U.S. market, which heavily skews toward utility vehicles?
It's important to offer a balance of sedans and crossovers. The [Charleston, S.C.-made] S60 sedan plays in a competitive segment that includes the Honda Accord. Yes, everyone is moving toward sport utilities, but you're still going to have demand for sedans. We want to have a player in that segment.
Is there adequate consumer demand in the U.S. for electrification just yet?
Consumer demand is evolving fast, but there are still concerns about range and charging infrastructure. Volvo sees a future in the electric vehicle business and wants to aggressively go after it. We're not taking a back seat.
What kind of investment will Volvo dealers have to make to sell and service the planned fleet of Volvo EVs?
We are in the cost-evaluation process. Investment in charging infrastructure and service equipment needed to work on electric vehicles could range from $50,000 to $300,000 per store.
The vehicle lifts currently used will need to be upgraded — they are too narrow to handle EV batteries. Dealers must also invest in training salespeople and technicians on the new technology. The dealer board is in discussion with Volvo to see if the training can be done virtually and if the cost can be subsidized.
Should Volvo be sharing the EV preparations costs with dealers?
Volvo is making a tremendous investment in the electrification of these vehicles. As a partnership, they look to the dealer network to also make an investment. Volvo does not currently plan to subsidize that dealer investment.
How has Care by Volvo 2.0 been received by dealers and does it go far enough to address dealer concerns?
Dealers look at Care by Volvo as another purchase opportunity for the customer. Volvo has addressed the concerns of the network and has used dealer input to improve the program.
Volvo recently added more flexible subscription terms making the customer commitment only four months — more clearly differentiating Care by Volvo from a standard lease.