For generations, Swedish automaker Volvo has enjoyed a cult-like following in the US. Its offbeat design has appealed to affluent, outdoorsy suburbanites who have loved its reputation for safety. Volvo owners have been more like an extended family than just customers.
A small but mighty force, Volvo — like the rest of the global auto industry — was hit hard in the Great Recession of 2007-09. Ford, which purchased Volvo Cars in 1999, sold the hobbled brand in 2010 to China’s Geely Holding Group.
Unlike now defunct nameplates such as Saab and Saturn, Volvo would manoeuvre out of the slump. A multibillion-dollar cash infusion, and one blockbuster new vehicle, helped make 2015 a record-breaking year for Volvo. It sold more than a half-million cars worldwide for the first time in its 89-year history. And this past summer it announced a $300 million strategic partnership with Uber to develop driverless cars.
Business Insider caught up with Volvo’s US CEO Lex Kerssemakers to talk about this remarkable transformation.
This interview has been edited for clarity and length.
Bryan Logan: Everyone is talking about Volvo’s self-driving-car project with Uber. How did the companies get together?
Lex Kerssemakers: One of the reasons we have the cooperation with Uber is that we share the same interest. We both have the vision to bring, as soon as possible, autonomous cars on the road. We have a lot of knowledge, they have a lot of knowledge. We develop it for Volvo, but at the end we will leverage our knowledge and also sell it to others.
Logan: A lot of automakers are developing autonomous-driving technology. One objective, among others, is to reduce the likelihood of traffic accidents. So it sounds like the Volvo-Uber partnership furthers your “Vision 2020” plan, your goal to eliminate traffic-accident deaths by 2020.
Kerssemakers: We believe it’s the only way to get to our target. [Uber CEO Travis Kalanick] believes it’s the only way to fulfil their business model, but it fits very well, because we use similar technologies.
Logan: Why Uber?
Kerssemakers: We need miles. We need to find out how the technology operates in an automotive environment. They have elected Volvo because we have the electrical infrastructure to facilitate their system. And at the end, we need experience, and by this we gain experience together. It’s a perfect setup — and also for Uber, because they get a very nice, good-looking car in which they can just plant in their system.
Logan: How did Volvo and Uber end up in the same room together?
Kerssemakers: We met a year ago. My CEO and I were there, and Travis, the team, the engineers were all there. They talk the same language. Uber is very good, they are very far. And our engineers love to talk to them and do things together. My CEO has the same vision as Travis. That’s why it went so fast, and everything goes fast here in San Francisco.
Logan: General Motors is also making a play in this space with its partnership with Lyft. And there are a number of investor-backed startups all trying to carve out a corner in this market. Some of them are moving to redefine the idea of car ownership.
Kerssemakers: Everybody is doing their thing. Our business model is providing mobility, and there will be all sorts of mobility and ways of transport. People will own a car, people will share a car. At the end, it’s part of the mix, and if the mix is 10% here or 20% there, we are going into this very open-minded.
Logan: Tesla CEO Elon Musk often calls Teslas some of the safest cars out there because of the company’s Autopilot self-driving feature. Does that rattle you, knowing that Volvo is traditionally known as the safest car on the road?
Kerssemakers: In the end, we need to create a society where 33,000 people aren’t killed [in auto accidents] every year. So I can only encourage him in making safe cars. I know which is the safest car company, and we’re not going to give that up. This is a long-term journey and not “we’ve got to win this year and that year.” It’s a long-term journey. We collect data from real-world accidents, and we’ve got a really good idea how cars react in different accident scenarios. Our whole team are data-driven. They can model all that real-world information back in digital and replicate it in our crash-test safety center.
Logan: The current XC90 SUV, the new S90 full-size sedan, and eventually all new Volvos will be plug-in hybrids with four-cylinder turbocharged engines. What plans do you have for fully electric cars?
Kerssemakers: We started to talk about electrification in 2008 when we took the decision to go for four cylinders. Fuel efficiency is huge, that’s why we went for the four-cylinder turbos and electrification first. After that, we move to full electric, in 2018 or 2019. It is the future, let’s face it. The era of big cylinders is over — people want to have big cars, but they still should be efficient.
Logan: Tesla is leading the way there. They more or less broke the stigma of range anxiety and the notion that electric cars weren’t stylish or practical.
Kerssemakers: They definitely broke up the perception. They did a good job.
Logan: You just launched the S90, the first new full-size luxury sedan from Volvo in a decade, and the second brand-new model since the acquisition. What kind of response are you seeing from the market?
Kerssemakers: The demand globally — you can imagine — everybody wants to have the car. I hope to sell 3,000 of them this year, if we get enough cars to do so.
Logan: What kind of long-term sales expectations do you have for the S90 considering SUVs are consistently outselling sedans?
Kerssemakers: You get fewer people, but the people who come to the showroom, they’re very dedicated to buying one. It’s a different type of market with different customers.
Logan: The XC60 — which is actually a bit older than the XC90 — is still selling like crazy too.
Kerssemakers: They’re both doing well. We just launched a new four-cylinder with all-wheel-drive in the XC60, so now we have our new Drive-E engine there also. The XC60 and XC90 are our best-selling cars, and it tells you something about the SUV boom that is going on right now.
Logan: You’re looking to compete with BMW and Mercedes-Benz, which, to be fair, have larger model lines than Volvo.
Kerssemakers: We have a small SUV coming, the XC40. All our new compact cars — built on the Compact Modular Architecture (CMA) platform — will come to the US. Every car we make will be global.
Logan: So before all of Volvo’s progress over the past few years, the company was on the rocks for a bit. And then a Chinese auto company, Geely, stepped in. What’s the state of that relationship today?
Kerssemakers: Under Geely, Volvo operates as a standalone company. [Geely founder Li Shufu] gave Volvo full authority, time, and patience. He bought Volvo in 2010. The XC90, which represented everything we presented to him, was only introduced in 2015, so five years later. So he has been listening to me and to a few others for five years in a row. Each time we showed him our progress, he said very good, sign it off, and he has opinions, but he trusted Volvo. He gave us the authority to do what we’ve done because he has a long-term vision.
Logan: Early on, some Volvo fans were concerned that the company would lose its Swedish identity under Chinese ownership. What’s your response?
Kerssemakers: I’ve had many meetings with the CEO of Geely. We share a lot. We try to combine things, because that’s efficient from a corporate perspective, but at the end, Volvo is Volvo, Geely is Geely. It has worked extremely well.
Logan: People had similar concerns about Jaguar Land Rover when India’s Tata Motors bought the company from Ford in 2008, but the company seems to be thriving now.
Kerssemakers: It’s too early to celebrate victory, because we are still on the journey. But it’s those from India who took over Jaguar-Land Rover, it’s those from China who took over Volvo, who have shown the Western world how it should be done. We have seen many takeovers in the past, and they haven’t all been so successful. Both Tata and Geely were very clever, and it’s a very interesting story. Again, it’s too early to call it a victory, but Jaguar-Land Rover is doing very well and we are getting better year after year. That’s food for thought in the future.
Logan: You’re building your first US-based assembly plant in South Carolina. How is that coming along?
Kerssemakers: We are still on track. End of 2018, we should be producing the new S60 there. It’s very exciting. Building a factory, to me, is so cool. And the governor, the local authorities there are so supportive. It’s not always about money — it’s also about attitude, the money you can get, support, and incentives in every state. It’s about how they approach things, how entrepreneurial they are.
Logan: That puts Volvo right in BMW’s and Mercedes-Benz’s backyards.
Kerssemakers: The South is strategically a good place to be. We needed to be close to the sea, so we could import and export cars and parts. At the end, it’s about human beings. Is there a click, is there a connection? Do we feel comfortable that we are going to make the journey? We found that in South Carolina.
Logan: Bringing it back to California, a bunch of carmakers have set up research-and-development hubs in Silicon Valley. What is Volvo planning?
Kerssemakers: We’re already in Camarillo, in the Los Angeles area, where we have the concept and design center. We developed, together with Apple, CarPlay from our office in Camarillo. We worked with Apple, and of course Uber, we do some things with Microsoft [HoloLens]. We’ve had such good experiences that we have decided we want people from the Bay Area working for us. So we will open an office — they’re putting in the furniture now. We will have about 70 engineers. We call it Volvo California. It’s one organisation with two offices. The new one is in Mountain View.
That office will focus on autonomous driving, connectivity, infotainment, everything that’s happening here. We’re a small company with short communication lines, which makes a big difference. We don’t have 25,000 layers, so we can do things very fast. We’re leveraging on that now, because otherwise we could have never built all those new platforms, new factories, new engines, electrification, new infotainment. We did it all in five years with 6,000 engineers, so it’s pretty strong. And we’re selling cars.
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