Half of all cars provided to customers by Volvo Cars within the next decade will be through subscription services, the company’s president and chief executive has revealed.
Hakan Samuelsson said the strategic shift to a pay-on-use model for its vehicles is part of a transformation of the business designed to cement direct consumer relationships.
Initiatives designed to transform its connection to its customer base mean it will build a total of more than 5 million direct consumer relationships by the middle of the next decade, to create new sources of recurring revenue.
Samuelsson said: “Our customers’ expectations are changing rapidly. This means that Volvo Cars is also changing rapidly. These initiatives will help transform Volvo from being purely a car company to being a direct consumer services provider.”
In addition to changing the way vehicles are financed and provided, Volvo Cars expects half of all sales annually to come from fully electric cars and one third to be capable of autonomous driving, offering the company far greater potential to develop connected and other services for customers.
It aims to generate profits that benchmark closely with rival premium car makers, driven by increased sales and revenues globally.
A key new revenue stream will be sales to autonomous ride-hailing companies, Samuelsson said, following its recent deal to supply 24,000 vehicles to Uber.
The company’s improved financial performance will also be driven increasingly in the future by industrial partnerships to drive efficiencies.
Volvo Cars expects to benefit from lower procurement costs, shared development costs and economies of scale alongside Polestar, its premium performance electric car brand, and Lynk & Co, the new global car brand and subscription service from parent company Geely, in which Volvo Cars owns a 30% stake.
Samuelsson said: “This paves the way for Volvo Cars to continue growing fast into the middle of the next decade.
“The company has been transformed since 2010 into a global premium car company. Now it is time for this transformation to be turned into a period of sustained profitability in line with other premium brands.”
Volvo Cars achieved record profits and sales in 2017, with a 27.7% increase in operating profit and global sales of 571,577 cars, but the new plan could see the company selling 1.2 million cars annually by the middle of the decade.
Volvo Cars has been under the ownership of Geely since 2010.