The world doesn't need another sport-utility vehicle, but car companies have a hard time seeing beyond the competition. And because Volvo has seen just about everyone else hit the road with a high, wide and profitable SUV, Sweden's safe-and-sane auto maker soon will have one too.
It may be one of the last to arrive at the party, but Volvo, a unit of Ford Motor Co.'s Premier Automotive Group, doesn't intend to go unnoticed. Playing on its reputation, Volvo will market its XC90 as the safest SUV on the road when it hits showrooms late this year.
Industry analysts say the company stands a decent chance of success even though it will be entering a market crowded with 54 models and more on the way.
SUV buyers these days tend to think of their purchases as smart ones from a safety perspective. The cachet of an SUV with Volvo-level safety components can't hurt.
"Being safe has a lot of selling power," said George Peterson, president of Tustin-based AutoPacific Inc. "For many, SUVs are today's minivans and they carry people's most important possessions--their children. They want them to be as safe as possible."
But the effectiveness of a safety-based selling campaign--Volvo also intends to promote the XC90's styling and luxury appointments--won't be apparent until sales actually begin.
Meanwhile, at least one industry watcher wonders whether Volvo-ness alone will do the trick. With most people who buy SUVs already citing safety as one reason for their purchase, "I don't know whether it is a big discriminator among the various SUV brands anymore," said Michael Flynn, director of the University of Michigan's Office for the Study of Automotive Transportation. Flynn also suggests that many SUV buyers are fooling themselves when they use safety as a major criterion for their choice.
Although an SUV is indeed safer for its occupants in a collision with a smaller passenger car, they are far deadlier than passenger cars in single-vehicle accidents because of their tendency to roll, he said. And in SUV- versus-SUV accidents, the combined weight and stiff frames of the two vehicles make it more likely than in a car-versus-car accident that occupants will be injured.
Still, SUVs--including truck-based models such as the Ford Excursion and car-based models such as the Lexus RX 300--accounted for more than 20% of all passenger-vehicle sales last year, and their share of the market is expected to climb for years.
So-called crossover SUVs, models that combine elements of car and truck in the same package, are expected to lead the growth. Most, like the XC90, look like traditional sport-utility vehicles but are built on passenger-car platforms and suspensions for improved handling and ride.
It is a market segment that an auto maker with growth ambitions cannot afford to ignore, analyst Peterson said.
Volvo executives agree. Plans are to expand to 200,000 vehicles a year in the U.S. by 2005 and 600,000 worldwide. "But we cannot do that without a car like this," XC90 project director Hans Wikman said. Volvo sold 125,710 vehicles in the U.S. last year.
The target market for the XC90--the third in a new family of all-wheel drive XC (or Cross Country) vehicles from Volvo--will be buyers moving up from sporty and near-luxury cars such as the Nissan Maxima and Acura TL or moving over from other near-luxury SUVs.
"We expect 70% of our buyers to be 'conquests' from other brands," said Peter Horbury, Volvo's chief designer, who headed the XC90 design team.
The rest will be Volvo customers who have been waiting for an SUV or who left the brand for a competitor to get an SUV but would return to Volvo if it had one, said John Neu, U.S. manager for the XC90 project.
When Mercedes-Benz and BMW launched their SUV lines, they were highly successful in winning customers away from the competition. Each reported that 80% of first-year sales were to converts from other brands, Peterson said.
But in both cases, the SUVs were radically different from anything else the companies offered. Volvo's XC90 "is more like a Volvo wagon on steroids," said Wes Brown, an industry analyst with the Nextrend consulting firm in Thousand Oaks. Like Flynn , he believes Volvo might be aiming too high in predicting a 70% conquest rate.
Volvo began developing its sport-utility in 1998--the year before its acquisition by Ford--and intended it to be primarily a vehicle for the North American market. It was designed at Volvo's California studio in Simi Valley.
Volvo initially expects to sell 50,000 XC90s worldwide; almost 35,000 will be allocated for the U.S., said Thomas Ahlborg, Volvo's XC90 marketing director.
Although pricing hasn't been set, Volvo insiders say it should start in the range of $33,000 to $37,000 to be competitive with vehicles such as the Lexus RX 300 and Mercedes-Benz ML320.
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