Bling and style are barriers that the Chinese-owned, Swedish-based company may not be able to overcome.
BEIJING— In mid-July, Volvo, the Chinese-owned, Swedish automobile brand, held a press conference to announce some good news: sales have risen nearly 30% for the first two quarters this year. If everything goes smoothly, the carmaker should achieve, for the first time since entering the Chinese market, total annual sales of 100,000 units.
Still, Volvo is not exactly celebrating. Among leading luxury auto brands, Volvo's sales in the Chinese market have fallen short of expectations. When, in 2010, Volvo was sold to Geely, a Chinese multinational automotive manufacturer, an ambitious plan was announced — the goal was to hit annual sales of 200,000 vehicles by 2015.
For the first half of this year, the top twelve premium car brands in China enjoyed 18% overall growth. Were it not for the fact that Audi has hit some public relations bumps that dragged down their sales figure, the average performance could have been even better. Meanwhile, Volvo sales, focused on the 90 Series range - XC90, V90 and S90, did not make a breakthrough in the world's largest market, even though China has become the leading market for the historic Scandinavian carmaker.
So, how do you communicate better with Chinese customers? How does one luxury brand differentiate itself from others in the same class? These are the hard questions for a player like Volvo. Apart from the three best-selling German brands — Mercedes, BMW and Audi — almost all other luxury brands, such as Jaguar or Cadillac, are all faced with the same challenge as Volvo. It's true that Cadillac has seen a 50% jump in sales in the first half of this year, but it was the result of a major price-cutting promotion and is unlikely to be sustainable.
Style comes first
What else can Volvo do to lure Chinese customers, apart from its famous reputation for building the "safest" cars? One possible option can be seen from what Porsche has done, by launching a relatively inexpensive SUV to accelerate its entrance into the consumer marketplace.
Another is to drastically improve services and bring customers a unique user experience. Lincoln has taken that approach and seen its sales double, especially compared to most other high-end car brands that have an abysmal image of their services in China, especially Mercedes.
Still, when taking two steps back to see what features have led to the most success on the Chinese luxury car market, it is almost style rather than by technical progress. Take Mercedes-Benz as example. Ever since the German carmaker adopted a new design language for its new generation S-series its sales have risen sharply for three consecutive years. Similarly, the particularly avant-garde frontal design of Lexus are immensely popular in China.
Characterized as "discrete," the typical Volvo car owner is not particularly interested in bling and swagger in general. But in our personalized consumer era, where young people count more and more on the Chinese market, there is no doubt that Volvo's Scandinavian clean and familiar approach faces serious questions. Its manufacturing and technological advantages should not be sacrificed, but if Volvo wants to explode on the market in China it must find a new way to shine.