From dependable to disruptive: the reinvention of Volvo

Given the reputation of Chinese car firms at that time, there were fears Geely’s ownership would lead to a further decline in Volvo’s standards. Instead, Geely was true to its words of hands-off ownership, giving Volvo the resources it needed, then stepping back and letting the firm get on with it. Essentially, Geely’s approach was to let Volvo be Volvo.

A key moment in Volvo’s revival was the appointment of former MAN trucks boss HÃ¥kan Samuelsson as CEO in 2012. His polite Swedish calm belies his determined, decisive leadership.

His focused strategy stems from Volvo’s size: even with Geely’s backing, it still can’t match the resources of the VW Group. “We have to prioritise,” says Samuelsson. “We cannot do everything so have to choose.”

He adds: “We like to think we are very good at thinking in an open way. It’s not a disadvantage being small. If you are big, there are probably too many experts on board who will tell you everything is important. That means it’s not that easy to break out of the old way of thinking.”

So far, Samuelsson has chosen right – and with conviction. Volvo worked with Geely to develop the Scalable Product Architecture platform to underpin a new generation of mid-size and larger models, starting with the Volvo XC90 SUV in 2016. The first car developed entirely under Geely ownership showed that any fears of a decline in Volvo quality were misplaced.

The firm has subsequently led the development of the Compact Modular Architecture (CMA) for smaller vehicles, including the Volvo Volvo XC40 compact SUV. Crucially, it also future-proofed CMA by designing it to house both combustion-engined and electric powertrains. Henrik Green, Volvo’s tech boss, says this reflects the fact that Volvo couldn’t afford to develop separate platforms for combustion-engined and electric cars, as the VW Group has done with the MEB architecture. So it applied the lessons it learned surviving with far more limited resources. “You get very creative having no money and no time,” laughs Green, reflecting on the firm’s pre-Geely days.

Volvo is following the same trends – electrification, autonomy, shifting sales patterns – as most major car firms, but is setting itself apart through the decisiveness and speed of its actions. Volvo has turned its relatively small size – traditionally a huge disadvantage in the car industry – into a major strength by acting with the agility and responsiveness of a tech start-up.

Lex Kerssemakers, who has served as Volvo’s commercial boss and now heads its new Direct Consumer Business division, says: “We need to act very quickly if we want to play a role in the future and not just become a commodity player, with third parties taking over our business. That sounds a little bit reactive but it’s not, it’s proactive. We see trends and we want to be part of those trends.”

The biggest trend, of course, is electrification. Tough new emissions requirements and greater environmental awareness are pushing every car firm to electrify their range, but Volvo is aiming to do it faster. Every model it launches from now on will feature an electrified powertrain (a hybrid or full EV) with the aim that every Volvo sold by 2025 will be electrified in some form – 50% of those being an EV. By 2040, and preferably sooner, Volvo wants to be an EV-only firm.

There’s no hedging here: no concurrent development on hydrogen, no further work on combustion engines, no insistence that diesel still has a role to play.

Kerssemakers insists that “the conviction we have as a brand going wholeheartedly into electrification is not because of legislation, but because we believe it’s the right type of vehicle for the consumer”.

The launch of the XC40 Recharge, Volvo’s first EV, coincided with worldwide attention on global warming sparked by Greta Thunberg and other protesters. At the launch event, Samuelsson spoke of how the global community had failed to address the issue, but how he felt the business community could. For him, that means putting sustainability at the core of Volvo’s thinking, “not as some add-on, because it’s good or expected from us, but because we think it’s really good for our business. It’s about concrete actions more than symbolic pledges.”

Coming from the leader of a company that has long produced polluting machines, it’s provocative stuff. But Samuelsson’s conviction was such that you believed he was speaking with honesty. He did so when announcing Volvo would limit all its cars to 112mph from 2021 onwards (“We know speed kills, and there is no reason to go beyond 112mph”) and when looking at how it could use autonomous technology to aid safety by, for example, limiting speeds outside schools (“Some people could see that as intrusion, so we need to ask how far we should go in limiting choice and freedom”).

It’s the same with Volvo’s approach to sustainability and the environment. Samuelsson is honest: he believes Volvo can help save the environment by going electric, but also thinks it can make money.

“If you introduce new technology in the first years, it will probably lower your margins, but after some years, you introduce new technology because you believe it will improve your profit,” he says. “That’s experience from the past. If you stay with outdated technology, that’s not a smart way to improve your profits because the margins start to disappear, and you’ll eventually close down.” Samuelsson likens it to Volvo’s long quest for safety: “I imagine when we introduced airbags in our cars, there were some bean counters who said this is not good for profitability.”

That comparison highlights how Volvo’s current disruptive, dynamic approach is actually consistent with its safety-focused history. At its best, the firm has always showed the courage of its convictions, rather than chasing trends. Geely, to its credit, has recognised that, and given Volvo the space and resources to do so. “In the past, we were also potentially a little bit disruptive,” says Kerssemakers. “But now, with our increased size and importance on the market, people start to look at us a little bit more.”

The timing has been fortuitous, too: the disruptive force of electrification has rewarded the quick thinkers. Samuelsson highlights the appearance of traditional-style engine grilles on EVs being launched by some rival firms as an example of how larger companies can become “trapped in a mindset”.