The premium carmaker, now owned by China’s Geely, is staying true to its Scandinavian roots, choosing to build the second generation of its large SUV at home, in high cost Sweden.
Automakers today are eagerly embracing low labor cost countries for vehicle production – a feat that usually works when talking about mass-produced cars. But when it comes to high-earnings premium carmakers, such a move could take away their luxury image.
So, the Volvo Car Group has chosen to keep engineering and assembly of the second-generation XC90 SUV in Gothenburg – the maker’s hometown. The flagship sport-utility vehicle is part of the company’s strategy to spend around 50% of the annual development budget of 75 billion kronor ($10.8 billion) in its home country.
“If the engineers just sit in laboratories and lose connection to the daily use of the cars, the cars will not be good enough,” says Volvo Cars Chief Executive Officer Hakan Samuelsson. “The engineers have to experience the car personally — scraping ice, seeing how the defrosters work, seeing how fast the seats heat up.”
The strategy is not without its risks – Volvo has some technological catching up to do if it wants to oppose the German premium trio. Also, according to figures from trade group VDA, Sweden is the country with the second-highest labor costs in the world – after Germany.