New factory investments? Now?
Volvo Cars will double down its bet on its upcoming U.S. factory by adding production of its next-generation XC90 crossover and boosting investment to a total of $1.1 billion.
Volvo said Monday it would double its investment in the factory, committing a total of $1.1 billion and adding 1,900 workers to a planned force of 2,000 for a capacity of 150,000 vehicles. The South Carolina plant is slated to open in fall 2018, launching with the production of the S60 sedan. Production of the second-generation XC90 will begin in 2021.
The XC90 — Volvo's best-selling vehicle in the U.S. and currently built in Torslanda, Sweden — is the second vehicle planned for production at the Chinese-owned Swedish automaker's factory, currently under construction in Berkeley County, S.C. The plant will be Volvo's first manufacturing operation in the U.S., and is a key part of its growth strategy to nearly double sales in the region by 2020.
"We started our South Carolina factory to strengthen our footprint in the U.S. and reconfirm to our retailers and customers to stay in the U.S. in an active way," Lex Kerssemakers, outgoing CEO of Volvo Cars of North America told Automotive News. "We need a second car to make that sustainable."
Under the ownership of Ford Motor Co., Volvo's U.S. sales peaked in 2004 at 139,067 vehicles, then dropped precipitously to 53,948 in 2010, when it was sold to Zhejiang Geely Holding Group in China. The Swedish brand has been refurbished under this new stewardship, with sales steadily rising behind the popularity of the redesigned XC90, introduced in 2014.
Volvo sold 32,522 XC90s in the U.S. in 2016, out of 91,522 globally, and has sold 17,421 in the U.S. so far in 2017.
Issues with global supply of the XC90 caused sales in the U.S. to dip in the first half of 2017, though they bounced back with an increase of 4.1 percent month-over-month in August. Kerssemakers said the sustained demand for the crossover was a driving factor for the decision to produce it in South Carolina.
"The U.S. is, and will be, the single biggest market for the XC90," Kerssemakers said. "It's very natural to bring it much closer to customers."
He added that U.S. production of the XC90 opens up the possibility for custom orders of the vehicle for customers in the region. The automaker has been experimenting with custom, on-demand ordering of the V90 wagon, which is not stocked at U.S. dealerships.
Kerssemakers is leaving his role in North America to head the Europe, Middle East and Africa region, and will be succeeded by Volvo's current senior vice president of EMEA, Anders Gustafsson. He was to depart Sept. 15, but decided to stay in the U.S. for the announcement. He will head back to Europe in a few days.
Volvo has rolled out a slew of redesigned and new vehicles in the U.S. since the redesigned XC90, including the S90 sedan, V90 Cross Country wagon and most, recently, the XC60 midsize crossover, all to critical acclaim. On Sept. 21, the automaker unveiled its contender for the luxury compact crossover segment, the XC40, packed with new technology and services and slated to arrive in the U.S. in March 2018.
Volvo's renewed lineup and investment in a U.S. factory has spurred dealers to invest more in their own facilities, Kerssemakers said, adding that more than 200 retail locations have plans to renovate or expand their business.
"We invest a billion dollars, it's a trigger point for our retailers to re-engage with Volvo again," he said. "They didn't invest for many years because we were out of sight, out of mind."
A U.S. manufacturing presence is also important for the Swedish automaker as trade restrictions could become tighter under President Donald Trump's administration.
"We have a long-term vision with the U.S. market," Kerssemakers said. "The U.S. is such an entrepreneurial country, we count on the fact that common sense will remain."