Because of new owner Zhejiang Geely’s investments, Volvo is able to plan increasing leasing and spending a larger amount on advertising in the U.S. in 2011. Doug Speck, CEO of Volvo Cars of North America, said that the company has been operating using a strategy that maintains margins “at the expense of volume.”
Last year, Volvo's lease penetration was about 10% last year but is expected to increase to 20 to 30%. And just this month, Volvo started to offer competitive lease rates (such as $299 a month for 36 months with $1,995 down) on the new S60 T5. These new leases will be mainly for the S60 and the XC60 crossover.
However, Speck said that Volvo won't be able to reach the 40 to 50% leasing penetration of several of its rivals in the luxury segment. He explained that buying a Volvo gives a “very good value” due to its offer of free scheduled maintenance for five years or 60,000 miles.
He said that this “will balance the percentage” of what’s done in leasing. When it comes to advertising spending, Volvo will sharply raise this figure. In fact, ad expenses for just the first quarter are equal to what was spent last year.
TV advertising is included in the total ad costs. Last year, Volvo promoted the redesigned S60 for only two weeks on TV. For 2011, Volvo expects a double-digit increase in sales, mainly due to the appeal of the S60 and XC60. [via autonews - sub. required]