Volvo is on track to have its fifth consecutive year of record vehicle sales in 2018, and CEO Hakan Samuelsson expects the success to continue in 2019. The Swedish automaker, however, faces some tough challenges after a trade dispute between the U.S. and China hammered its third-quarter financial results and forced it to adjust exports between its two largest sales markets.
Samuelsson is also aggressively driving Volvo into the autonomous era by setting a goal that a third of the automaker’s sales come from self-driving vehicles by 2025. Samuelsson shared his thoughts in multiple interviews with Automotive News Europe.
What is your forecast for the U.S., European and Chinese markets in 2019, and how will Volvo perform?
Overall, there are no signs of a downturn. Europe and the U.S. are doing quite well. In China, however, there are signs of a weakening market after years of strong increases. If you look at our position, we are not really that dependent on the overall market. That is one of the advantages of being small. Our growth is coming from the strength of our products, which are really taking market share. Therefore we are optimistic that this year will be another record year and next year should be another year of growth.
Why was Volvo more prepared than its German premium rivals for the move to the WLTP test regime in Europe?
We were one of the few brands that could offer all of our cars according to the new regulation for two reasons. The first is that we benefited from having a smaller lineup of models, but secondly, we started adapting our models earlier. Some of our vehicles were certified one model year ahead based on the new standards. Starting early was a good investment.
Is this why Volvo increased European sales in September, for example, while Audi, BMW and Mercedes all took big hits?
Yes, they were not ready with all of their models. We were lucky that we started so early with the homologation of these cars. That being said, I think all of us in the industry underestimated the effort needed [to make the transition].
How much will the U.S-China trade dispute hit your business this year and in 2019? Are you worried about additional tariffs between Europe and the U.S.?
Let’s look at the starting point. I don’t think we had very open and balanced trade in these three regions. The U.S. had a 2.5 percent entry barrier for cars, in Europe it was 10 percent and China was at 25 percent. If you really want level, fair global trade that should be harmonized. Our position is that it should be 0 percent. I hope there will be an opening and China will lower its barrier because we are one of the first automakers to build cars in China for export to the U.S. We would really like to see fair, open trade. Let’s see what happens. I think that if China wants to have a strong global car industry it should not have to protect its domestic market. They are beyond that point. They no longer need that protection. China has a very strong car industry and it should compete at a global level.
What is Volvo doing to lessen the financial blows from the trade dispute?
We build our big sedan [the S90] in China and ship it to the U.S. That is very difficult to do now with a 27.5 percent entry tariff. Fortunately, we have opened our new U.S. plant and can build sedans locally.
Will you speed up the introduction of the XC90 at your U.S. plant?
I think we have a very tight schedule [U.S. production of the new-generation XC90 is set to start in early 2022] so the pressure is already there. The factory has helped us enormously because we can build sedans there [starting with the S60] and avoid the tariffs. The new-generation XC90 is the next car we will build in the U.S., which is the biggest market for that car. In addition, the plant has boosted the morale in our organization and the confidence at all our partners, who see that we are committed to the U.S. because we are building cars locally.
Are you already seeing benefits after opening the U.S. plant this year? Is this contributing to your double-digit rise in U.S. sales so far this year?
No, not yet. We are on track to build about 5,000 cars this year but it’s ramping up so next year we should see the full first shift of production being utilized.
Volvo reported a 50 percent decline in third-quarter operating income and your quarterly margin was 3.4 percent. You aim to have a steady margin of 8 percent. How will you get there?
This decline, which has hit our competitors as well, is largely due to the trade restriction that came in before we could mitigate it by, for example, building sedans in the U.S. Now suddenly we are paying a lot of import duties. Another challenge is that we have a lot of startup costs for the new plant in the U.S. However, we will still have strong profits and a very high volume this year.
What is happening to your diesel share in Europe?
It is going down. That is the trend.
Are your plug-in hybrids benefiting?
Yes. Plug-in hybrids account for about 15 percent of the sales of models where the technology is offered.
When will your 48-volt mild hybrids start to arrive?
That will happen in 2019.