Volvo thrives with Scan-do attitude
Volvo’s sales director, Matt Galvin, talks to Craig Thomas about the company’s plans for 2020.
Against a background of tough economic conditions, Volvo had a very successful 2019, making inroads in the both the wider new car market and the fleet sector, with an 18% year-on-year increase in the latter.
The 17,000 fleet sales are obviously a result of having the right products on sale, products that fleet buyers want. And with the Swedish company committing itself to a programme of electrification of its models, their attraction to fleets is only going to increase.
But Matt Galvin, sales director for Volvo UK, isn’t resting on his laurels: the company has a programme of electrification, as well as a number of other initiatives, that should result in those fleet sales figures rising even further.
Volvo clearly doesn’t lack ambition when it comes to its plans for cleaner mobility. By 2025, it aims to have sold a million electrified vehicles – battery electric and plug-in hybrids – and for 50% of its sales volumes to be pure EVs.
It’s made a good start, as Galvin explained: “We now have an electrified version of every model in our range. Early this year, first deliveries of XC40 plug-in hybrid will start, which will be very, very popular with our fleet customers. In fact, of our recent fleet orders for XC40, 44% are for PHEVs.
“Then our first fully electric Volvo, the XC40 Recharge, comes in the latter part of the year. After that, we will have a battery electric version of one of our cars every year over the next five years.
“We believe electrification is the future, so all of our investments in powertrain technology and new product development are around battery electric powertrains.
“We still have a plan for the next few years for our internal combustion engines, though. They will still be an important part of our portfolio, moving forward. We’ve just introduced mild hybrid powertrains into the XC products, with the 48-volt battery assisting emissions and fuel consumption. Tat technology will be rolled out across the rest of the range for model year 2021, which will be delivered in June. At the same time, new RDE2-compliant diesel powertrains will be available on the whole range. That means every model will have RDE2 and mild hybrid variants next summer.”
However, electrification is the inexorable trend in the automotive industry, a trend that the cost-conscious fleet sector will embrace – but only when it makes practical sense for fleets to do so. This is something that Galvin and Volvo recognise.
“There is a shift towards electrification and we are committed to making sure that we are at the forefront of that shift, when customers are ready,” he explained. “Because consumer demand plays a big part here, too. It’s something that we are monitoring very closely, to ensure that we are ready when consumers are ready.
“In terms of the fleet market, there are clearly some big tax changes coming this year around battery electric cars and plug-in hybrid powertrains. That is going to drive consumer behaviour quite strongly: around 25-30% of customers are already choosing PHEVs. The high percentage of our XC40 plug-in hybrid powertrain orders from our fleet customers is an indication of how that market is starting to move and that will develop further, as the year goes on. But those tax incentives will play a big part in how quickly that market develops.”
Taxation isn’t the only area where there are incentives for going electric, though. Volvo is currently offering all purchasers of plug-in hybrid models a year’s worth of free electricity – which theoretically could mean free fuel for an entire year, if drivers only use electric power.
Galvin said: “That is available to fleet customers who use our Volvo On Call app as well. The reason we are doing that is to try and highlight to customers that plug-in hybrids can be driven as electric cars, if the journeys are appropriate. The offer is about incentivising more use in pure battery mode, rather than using the ICE engine. And for every kilowatt hour that you use to charge your car, and then subsequently to drive, we will reimburse at an average rate per kilowatt hour at the end of the year.
“We think it will help those people who are not quite sure whether to make the crossover from the traditional ICE engine to a BEV.
“It also includes anything they pay on public chargers as well. It is all driven from the On Call app, which will know how much charge you put into the car. From there, we will be able to deduce how much electricity you have used and, therefore, how much we are going to reimburse that customer. We are going to take an average rate for the cost of the electricity across the UK, which will be published in the terms and conditions. We have full transparency of what they are going to be reimbursed for, which will translate into a reimbursement at the end of the year.”
The other innovation that Volvo will roll out in 2020 is the way that customers pay for cars. The mobile phone market has made us all, as customers, used to changing or upgrading a product every 12 months, rather than waiting for two or three years, making the longer deals in the leasing and contract hire field feel a little restrictive.
The Care by Volvo subscription programme, due for a full launch in June 2020, aims to tackle this by being as flexible as a customer wants to be. Galvin thinks that this is just what customers want: “They like the fact that they are not locked in for three or four years and they can come out at any point. I think that is really interesting from a consumer perspective. Consumers are moving more to usership than ownership and that usership model does rely on a certain amount of flexibility, because their needs change quickly. If you wanted to come out five months in, you could, with a minimal penalty: you could then change it for another Volvo or do something entirely different.”
The other thing that Care by Volvo offers is bundled services, so there’s just one payment for everything – the lease, insurance, servicing and maintenance, and roadside assistance.
That one payment will, at first glance, look high, but Galvin explained how it is calculated: “The biggest addition to the monthly car payment is the insurance. Some people forget about how much insurance costs. We’re able to demonstrate that the average cost that we’re charging for insurance is in line with the industry. Yes, £800 a month for a Care by Volvo deal sounds like a lot of money, but for that your car is paid for, it’s serviced, it’s taxed, it’s maintained and it’s insured. And that’s it.
“Our job now is trying to make sure that we can get a message across that says it’s good value. There’s always going to be a slight premium for bundling all that together because it’s convenient, isn’t it? And there’s a cost for convenience.”
Volvo certainly doesn’t seem to be afraid of taking risks by being first to market with innovative products, whether they be plug-in hybrid/electric cars or financial products that reflect changing consumer behaviour. And, so far, it’s working for the brand, even in these difficult times.