One to one – new Volvo boss sees growth, but fewer dealers

Many consumers don’t understand what Volvo is or what it stands for.

That’s the bold assertion of the Swedish brand’s new UK MD, who believes forthcoming new product is crucial to building Volvo’s image in the UK.

Nick Connor was named head of Volvo UK three months ago, having been filling the role in an acting capacity since July 2011.

It’s an exciting time to be in charge, with a stream of new product on the way and Volvo still newly in the ownership of Chinese giant Geely, which brought the brand from Ford in 2010. Not that Connor believes that registers with buyers.

“I don’t think people know we are owned by the Chinese – I think they forget,” Connor tells CarandVanNews at the launch of Volvo’s important new C-segment contender, the V40.

“It hits the business news occasionally but has no effect to our day-to-day operation – Geely are shareholders, they are very supportive of what we are doing and they leave us to get on with it.”

More pertinent to Connor is Volvo’s position in the market, which he describes as “semi-premium” while admitting that he hates the word premium.

“Customers don’t talk about premium, they talk about luxury – and some of our product (such as the XC90) is luxury, while some sits above volume but isn’t ‘premium’. Currently we sit between the volume and the German brands.”

Such a position, he adds, causes confusion amongst customers. “It becomes a lot easier when you have the products to support the luxury positioning and that’s where we are going.”

The V40 is indicative of what Connor describes as “Scandinavian luxury”, not full of glitz and glamour but offering simplicity of design and functionality, and very high quality. “You can make a product that will operate in a volume segment but feel very different, really quite luxurious.”

Volvo has some ground to make up. The brand expects to see sales of around 35,000 this year and is looking to grow fairly quickly past 37,000. But two decades ago, when Volvo last offered a five-door hatch in the competitive C segment, it was seeing annual sales of 80,000…

However Connor is determined not to push cars into the UK market. “We are going to steer away from the low-margin high-volume sales channels. We don’t need to do it as we have enough capacity to meet global demand, we don’t have hundreds of factories that we need to satisfy, we have one factory producing this car very efficiently. I’m always keen to keep supply slightly behind demand.”

And he expects the market to remain tough, questioning recent apparent growth. “I don’t think it will get any worse or any better over the next six months. The SMMT figures show growth but you have to ask yourself where that growth is coming from – you have to be realistic as to how many of those cars are finding real end-user customers.

“We are focused on supplying cars to customers – I don’t want to pre-register loads of cars or supply to daily rental companies because they come back, they distort the market and make life difficult for everybody.”

He contends that the UK’s underlying economic position is actually not too bad, with debt being paid off and low interest rates – the issue remains building consumer confidence.

“Volvo is in a better position than most because the profile of our customers is slightly older, they don’t have such a big debt exposure compared to those of premium German brands and they have to borrow less to buy a car.”

He claims, in fact, that Volvo “hasn’t really taken part” in the recession.

However its customer base is changing, with the age profile coming down and the brand’s corporate profile increasing.

“Cars such as the C30 have brought a lot more younger drivers into the mix and V40 will improve our profile further – the design is more contemporary, people who would not have considered a Volvo 10 years ago now will buy it purely for the design.”

Growth in sales might be expected to be accompanied by a growth in outlets but for Volvo the reverse is true. Connor says his network needs to shrink – from the current 110 outlets to 90.

The reason, he says, is changing customer buying habits. Today’s customers no longer visit a string of dealers to choose their car, but instead do their research online.

“They will test drive a car but they will know what they want before they go into the showroom – the customer is now probably prepared to drive an hour to have the test-drive opportunity because they know what they want and do not consider themselves wasting their time.”

So the plan is to reduce the dealer head count, to enable more investment on the remaining outlets; “We want to give customers a genuine luxury experience in the dealership that reflects the investment we have made in product and the brand.”

Connor insists there will be no overnight terminating of dealer franchises – the reduction planned over a timsescale stretching to 2020.

“If we have dealers who have underperformed in terms of customer satisfaction and volume, we’ll give them the opportunity to get better.

“If we have dealers who are unable or unwilling to invest we’ll say no hard feelings but we’ll move on.

“We’ll get the 90 that we need in the right locations with the right premises and right staff and give the customers the experience they need.”

For the CarandVanNews first drive of the Volvo V40, click here.

Words by: Andrew Charman