Volvo plans luxury sedan to challenge BMW, Audi and Mercedes

MUNICH (Bloomberg) — Volvo will introduce a new luxury sedan next year that will replace its struggling S80 model as the Swedish automaker takes on cars from BMW, Mercedes-Benz and Audi in a bid to boost annual deliveries 70 percent by the end of the decade.

“We will have a true premium alternative to the three German brands,” CEO Hakan Samuelsson said in an interview at the company’s headquarters in Gothenburg. “That’s really what we’re working with.”

Volvo is targeting annual sales of 800,000 vehicles by 2020. Last year, the automaker sold 465,866 vehicles, a rise of 9 percent.

Samuelsson plans to unveil the S80 replacement, the S90, at the Detroit auto show in January, as part of a strategy to both increase sales and come closer to matching the German competitors’ profitability. Volvo is targeting the S90 at potential buyers of the BMW 5 series, Mercedes E class and the Audi A6. The Swedish automaker plans to follow up with a station wagon version, the V90, and is working on more additions to its lineup, Samuelsson said.

“If you would pick some models being the most important to Volvo, it’s the SUV segment, which is growing rapidly, and you need a smaller one, of course,” the CEO said. Demand is rising for “small premium cars,” a segment that’s “very attractive for us.”

Samuelsson, 64, who has extended his contract with Volvo for another three years, stuck to a forecast of delivering about 500,000 cars this year, even as growth slows in China, the biggest auto market. The global target compares with the 2.12 million vehicles sold last year by BMW Group, the biggest luxury carmaker, including its Mini and Rolls-Royce marques.

Volvo’s parent, China’s Zhejiang Geely Holding Group, bought the automaker from U.S. automaker Ford Motor for $1.8 billion in 2010 and has been working to overhaul the carmaker while preserving its reputation for safety features. Volvo is pegging the brand’s revival on a range of new models, the first of which was the XC90 SUV that replaced a version built since 2002. As of the beginning of this week, Volvo had received orders for 65,000 XC90s, exceeding the full-year target of 50,000.

Volvo is currently completing a five-year, $11 billion global investment program. Projects included the introduction this year of the revamped XC90 SUV, the manufacturer’s first model developed entirely under Chinese ownership.

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