Automobile

Volvo’s Samuelsson: A good time for change

But before Samuelsson can get to the “new normal,” he must navigate a crisis that’s going to get worse before it gets better.

This year, Volvo has had sporadic shutdowns throughout its network, which includes plants in Sweden, Belgium, the U.S. and China, to cope with the chip shortage.

Recent COVID-19 outbreaks in Southeast Asia have shut down semiconductor and other supplier plants, gumming up vehicle assembly.

“The third quarter is really very problematic,” Samuelsson said. “There is a boom in demand for semiconductors that will continue limiting our growth rates.”

Based on announced factory stoppages, AutoForecast Solutions estimates the chip shortage has resulted in the loss of 2.6 million vehicles from automaker production plans in North America. The toll could rise to at least 2.9 million by year end, according to the firm’s forecast.

While hopeful that COVID-related supplier factory shutdowns will subside by the end of the year, Samuelsson expects to see reduced semiconductor capacity continue “probably through 2022.”

But the inventory crunch caused by the shortage has proved to be a blessing in disguise of sorts for automakers and their retailers. Eager customers are grabbing whatever new vehicles they can find on lots, driving up transaction prices and margins.

On the cost side, automakers are having to spend less on incentives and dealers on floorplan expenses.

All this has some automakers rethinking the old way of doing business, where manufacturers push vehicles on dealers, who then resort to deep discounting to get them off their lots.

Nissan Motor Co. has spent the past couple of years pulling away from the strategy of market-share-at-all costs championed by former Chairman Carlos Ghosn. Instead, Nissan’s pricing strategy is now focused on margins.

“The culture change from volume to value, from push to pull, is working,” Nissan COO Ashwani Gupta told Automotive News in June.

Samuelsson has a good starting point to think about changes in Volvo’s retail model. Its business is thriving. Despite the supply chain issues, Volvo sales in the critical U.S. market have been in overdrive.

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