Volvo’s new U.S. plant to roll out only top-selling models

Article by Andrew Christian, on June 4, 2015

Volvo’s new factory in the U.S. will only produce vehicles that bring in the most sales in this market. This doesn’t include the recently redesigned XC90 crossover, according to Volvo’s U.S. chief Lex Kerssemakers. He said that only the model that will be in the “highest demand in the U.S.” will be chosen. He mentioned that the brand’s hottest vehicles in the U.S. are the compact XC60 crossover and the S60 compact sedan.

In the first four months of the year, XC60 sales increased by 54% to 7,754 units. He didn’t say just how many models the automaker will eventually build in the U.S. The automaker had announced that its new $500 million plant located in Ridgeville, S.C., near the Charleston port, will produce 100,000 units initially.

Like other German automakers, the vehicles that will be built at this new plant will be exported. Kerssemakers said that it is “too early” to say what portion will be exported and if this plant will be lone source throughout the world for a specific model. The engines are sourced from Sweden.

Because of that, the local output of vehicles that will be built out of South Carolina will be 55-60%, according to Lars Wrebo, global senior vice president of purchasing and manufacturing. He said that Volvo will need to achieve annual sales of 300,000 units in the U.S. to justify having an engine factory in the country.

Wrebo said that this U.S. plant will be one of three plants owned by Volvo that build vehicles based on its new Scalable Product Architecture. The other plants are located in China and Sweden. The XC90 crossover is the first vehicle to have this new architecture. Wrebo added that as soon as U.S. production starts, it will be “proven technology.”

Last week, Kerssemakers inked a deal with South Carolina to have the factory built there. He shared that 7,500 people have signed up on the automaker’s recruitment website. The factory will start to hire in 2017 while production is scheduled to start in late 2018. In the next decade, Volvo estimates that the plant will have up to 2,000 employees.

In the longer term, it’s likely to have 4,000 employees. While Volvo is following rivals BMW and Mercedes-Benz in operating a plant in the country, it doesn’t have the German automakers’ reputation or sales volume. In the U.S. last year, Volvo reported selling 56,366 vehicles -- which is slightly higher than half of the proposed capacity of its new plant.

However, Kerssemakers is confident that Volvo's status will improve as its new vehicles arrive in the market. He said that the XC90 is already on a good start with positive feedback from dealers and the first group of buyers.

He said that these will help position Volvo as a “true premium player.” He stated that Volvo will not “start from scratch” as the XC90 and the next 2-3 products will prove that it is on the “right track.”

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