Why Volvo Is Losing Its Big Lead In Safety

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For much of its history, the name Volvo has been practically synonymous with safety. The Swedish brand has a long track record of safety innovation. It has often been the first to introduce features now common across the industry and for a long time enjoyed a reputation for going quite a bit further than competitors to reduce the risks of simply driving a car. The trouble for Volvo is that safety has become a far greater priority for consumers and automakers alike than it had been earlier in automotive history. Technology has improved,r egulations have tightened and other brands are catching up and are touting their own commitments to safety. It's getting tougher for Volvo to distinguish itself as a safety leader. Since it was taken over by the Chinese automaker Geely in 2010, Volvo has been steadily hammering out a new, more luxurious image as a serious competitor to German brands such as Mercedes and BMW. Now it is also making a remarkably aggressive push into electric and hybrid vehicles. So far, it seems to have worked. Volvo has frequently hit record levels of sales and profits in recent years. In July of 2019, for example, the carmaker reported its best ever first half year sales. But the carmaker in 2019 began warning investors of shrinking margins resulting from an ongoing global trade war and slowing global demand for cars. In late 2018, Volvo abandoned plans for an initial public offering over the same concerns. And Volvo is up against some far larger and far more deep pocketed competitors in its push toward an electric future. This is an expensive transformation fraught with risks. Safety has been one of Volvo's defining characteristics over the decades, and the company has a long, solid record as a safety innovator. One of its best known innovations is the three-point seatbelt as we know it today, which is nearly universal in cars sold in the US and in many other countries around the world. The three-point seatbelt held a few serious advantages over these simpler two-point lap belts, which had been common up to that point. Three-point seatbelts secured both the upper and lower body of each passenger in a vehicle, preventing the passenger from being thrown forward into the dashboard from the waist up in the event of an impact. Volvo also introduced the world's first prototype for a rear-facing child seat in 1964. The company was the first to introduce side impact and curtain airbags in the 1990s. Volvo created its own renowned whiplash protection system in 1998, called appropriately whips. Volvo was an early leader in the development of blindspot detection technology. It also created its own rollover protection system in 2002. In my observation, I think Volvo is a company that from very early on has paid a lot of attention to safety. And even today, the corporation says that safety is part of their DNA and we will see that reflected in their products. Apart from these innovations, the company has made other moves that distinguished it as a brand, especially interested in protecting its passengers. In the 1990s, Volvo, along with German automaker Mercedes Benz, pushed industry groups such as the IIHS to pay more attention to certain types of crashes the company felt were not getting enough attention in tests. Volvo continued to build cars that would protect against these impacts, even though they weren't being tested. The company was ahead of the shift that would come later. Roll the calendar forward several years and we come up with a small overlap crash test and we find that Volvo stuck to their to the research that they had done back in the 1990s and continued to develop products that would offer not only good protection and the moderate overlap crash, but also the small overlap crash. So Volvo products were among the first to earn good ratings in that new crash test for us, where some of the other automakers, even though they had had access to the same information that Volvo did back in the 1990s, sort of ignored that crash condition until we brought it more forward without with our crash test ratings. But safety has become more of a priority for buyers overall and for newer groups of customers who have an increasing degree of clout. One such group is women. More than 60 percent of car purchases are made by women and 85 percent are influenced by them, according to data collected by cars.com. And a survey from Kelley Blue Book found that safety is more important to women car buyers than it is to men. Automakers have taken notice, and while Volvo's products are still highly regarded, there is just not the same distance between the best and the rest that there used to be. If there is a gap, it's much smaller than it used to be 20 or 30 years ago for sure the attention that our Christmas programs have brought on safety and the changes that have occurred with government regulation. The government's own efforts toward consumer information have forced the automakers to step up their game in terms of safety. And I think the gaps are not as big as they once were. IIHS names vehicles from several manufacturers to its top safety picks list, including lower priced cars from Subaru, Mazda, KIYA and Hyundai. So absolutely has a reputation for safety and certainly people. So she Volvo would say the question really becomes is really are you getting more safety today with a Volvo than your other cars? And the truth is, is that while Volvo was innovators when it came to seatbelts and a lot of crumbles owns a lot of things in the past. Today, we're going to get a great deal of safety with many different vehicles. So you really don't have to go and step up to a Volvo to get a leading edge at safety anymore. Now, Volvo aims to distinguish itself in other ways. When Chinese automaker Geely bought Volvo in 2010, there was a certain degree of skepticism over the acquisition. Geely was a rather small Chinese automaker that made low cost cars for Chinese buyers. Volvo was thought to be on its last legs after years of ownership by Ford. Geely paid $1.8 billion for the carmaker, a fraction of the $6.5 billion Ford had paid for Volvo in 1999. After the deal was done, Geely Chairman Li Shufu said he thought Volvo ought to try competing more with Mercedes and BMW. But he also stressed that Geely would mostly leave Volvo alone. So far, that plan has worked out with Geely's backing, Volvo revamped its entire lineup, focusing heavily on sport utility vehicles that offer understated luxury features and interiors. The brand has played off its Swedish pedigree by designing its vehicles cabins around the theme of Scandinavian sanctuary with plenty of natural light and colors and materials that evoke nature. The brand's sleek new aesthetic is widely considered to be a sharp departure from the classic boxy and sensible family wagons and sedans Volvo had long been known for. That said, Volvo's name is still strongly associated with safety. In Kelley Blue Book's brand watch survey, for example, Volvo is ranked first among luxury brands for safety. It's the only category where it leads, and a few recent moves suggest the car company is as serious about protecting people as it has been in the past. It said in March of 2019 it will share hundreds of research papers based on data compiled by its traffic accident research team over the last 40 years. The project is called the Equal Vehicles for All Initiative or EVA for short. Part of the purpose of the initiative is to reduce disparities in safety among different populations, particularly between men and women. Which Volvo said results in part from heavy reliance on crash test dummies modelled on men's bodies. As you know that everything started really with Volvo cars heritage related to the safety belt. When we invited the solution, we decided to put it free for everyone. If you find something that can save life safe, you shouldn't give it out for free. To the other manufacturers so they can they can learn. And a got project was related to all the knowledge, based on all the tests that we have done with female drivers and all the facts based on how they are structured and because we are different. So I would say all of those facts and figures you should share. The brand also has a stated goal of eliminating all deaths and serious injuries from new Volvo cars by 2020. to achieve this end, it's making some other bold decisions. It said in 2019 it will limit speeds and all of its vehicles to a maximum of 112 miles per hour and it will install cameras in every car made from early 2020 onward. We had long discussions about this, you know. Driving a car it should be fun. You should be able to relax because the car is supposed to help you and support you. But we also know that when things are going a little bit too fast, it is tougher to have control over the car. And really, if we are very, very honest, you don't need to drive faster. You need to kind of move fast between two different speeds, but you don't need to have that maximum speed. And I think that suits very, very well with the brand. And also, we talked about the typical Volvo customer with what they are asking for and their strengths and weaknesses. I would say it fits quite well. CEO Håkan Samuelsson said the move could lead some to see Volvo as Big Brother, but added that if it can help save lives, it will be worth it. But perhaps Volvo's most dramatic transformation is into a premium brand comprised entirely of electric and hybrid vehicles. Even though the company is still touting its commitment to safe cars, its transformation into an entirely electrified car brand is perhaps gaining more attention. Volvo has said it plans to only make electric or hybrid vehicles from 2019 onward. It is aiming for half of its global sales to be fully electric by 2025 and the other half to be some kind of hybrid. By that time, Volvo wants to have 1 million electric or hybrid cars on the road. Volvo is pitching its move as both a bet on tighter emissions regulations around the world, including key markets in Europe and China, as well as a natural continuation of Volvo's focus on safety and well-being. Even a recent advertising campaign nods to Volvo's safety legacy while promoting its new focus on green vehicles. But developing electric power trains requires money, which may be tight as auto sales slow and companies find themselves caught in global trade disputes. Volvo arguably benefits tremendously from its ownership by Geely. Much of Volvo's sales growth came from China, and the two companies have been combining operations in some areas to share costs. However, Volvo is still a small fish compared with some of the other luxury brands it is competing with in electric cars or otherwise. So entering in the luxury market, especially as a European brand but not a German is definitely tricky. Because you're up against competitors have been doing it for decades that are extremely well known. Audi, Mercedes, BMW all have deep pockets, all have big marketing spend. All have really big advertising budgets. So it seems to me that Volvo is taking a different approach. I mean, they announced that all their vehicles are going to be their electrified in some way, whether it's a plug-in hybrid or whether it's fully electrified. And perhaps that is, you know, in terms of a strategy, their way to differentiate themselves amongst the German brands because they certainly get out German, the Germans. So trying to go a different approach, grab a lot of as much luxury car as possible. Maybe something they're trying to do. They're trying to find their unique way. And it seemed as if they put their their eggs in that electrified basket. While Volvo sold 642,253 vehicles around the world in 2018, the BMW brand sold 2,125,026. Volvo is also going head to head with illustrious brands such as Porsche and the continuously buzzed about California electric carmaker Tesla. But if it takes carbon emissions as seriously as it has taken safety, it could end up engineering something as influential as its famous three-pointed seatbelt. It's a reason why these brand is growing is a reason why we attract new customers. And that is a combination of all the design, design and safety you now focus on on the environment. And I think that the awards, we really appreciate it. It's very good for our employees and engineers that we get kind of receipt that we're doing the right things and I'm happy for that. But I would say it's the total, everything needs to fit to fit together to just have safety in the front seat; that is, of course, tremendous, extremely good. But we really would like to work with every single part of the car. That's the reason why we are strong.
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Channel: CNBC
Views: 1,830,359
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Keywords: CNBC, business, news, finance stock, stock market, news channel, news station, breaking news, us news, world news, cable, cable news, finance news, money, money tips, financial news, Stock market news, stocks, doug demuro, scotty kilmer, redline reviews, donut media, thefastlane
Id: bfuDOkW12nE
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Length: 14min 7sec (847 seconds)
Published: Mon Nov 25 2019
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