March 7, 2017 / 10:07 AM / 6 months ago

Stakes high as Geely's Volvo replaces best-selling SUV

FILE PHOTO - The Volvo logo is pictured on a car in a car dealership showroom in Riga August 18, 2014. REUTERS/Ints Kalnins/File Photo

GENEVA (Reuters) - Volvo Car Group unveiled its new XC60 SUV at the Geneva auto show on Tuesday, the latest launch in a sweeping overhaul of its model line-up under Chinese ownership that will be key to driving sales and earnings ahead of a possible listing.

Despite being launched almost a decade ago, the original XC60 has remained popular among buyers and been the automaker’s best-selling model since 2009.

It accounts for roughly a third of Volvo’s sales, leaving the new model with big shoes to fill as the carmaker looks to expand its niche in a premium market dominated by larger players such as Daimler’s (DAIGn.DE) Mercedes-Benz and BMW (BMWG.DE).

“The XC60 is in one of the hottest premium segments globally, so getting the execution and launch right is imperative for the growth of the brand,” said Bill Rinna, senior manager for North American forecasts at consultancy LMC Automotive.

“Globally, we expect the new XC60 to sell 175,000 units annually. Its two main competitors are not standing still however, as both the Audi Q5 and BMW X3 have or will be getting updates of their own.”

Volvo sold just over 161,000 XC60s last year.

Over the past couple of years, the company has begun delivering new models developed since its purchase by China’s Zhejiang Geely Holding Group Co. from Ford Motor Co. (F.N) in 2010, including the larger XC90 SUV and a new 90-series.

Volvo is banking on a joint platform developed under Geely’s ownership for all but its smallest models - key to keeping down costs and improving flexibility for a small carmaker like Volvo.

Later this year, it is also launching the XC40 compact SUV, aiming to further capitalise on a strong market for SUVs.

“Now we are really entering into a segment that should deliver volume,” Volvo Car Group Chief Executive Hakan Samuelsson told reporters.

“Before the end of the year we will have the biggest line-up of SUVs we’ve ever had.”

After struggling under Ford, sales at one of Sweden’s largest companies by sales and staff have risen sharply, hitting a record 534,332 cars last year.

Samuelsson has said he expects another record in 2017, the fourth straight if achieved, on the way to an annual target of 800,000 cars in the medium term.

Volvo has also taken steps towards a possible listing, raising 5 billion crowns ($557 million) through the sale of newly issued preference shares, though Samuelsson has said any flotation is a question for its owner. [nL5N1EF0ZW]

The new XC60 will be delivered with a range of powertrains, including a plug-in hybrid version, with production set to begin in mid-April at the carmaker’s plant in Torslanda, on the outskirts of Gothenburg in western Sweden.

A semi-autonomous driver assistance system, which handles steering, acceleration and braking on well-marked roads at speeds up to 130 kilometres per hour, will be available as an option, it added.

($1 = 8.9834 Swedish crowns)

Reporting by Niklas Pollard and Johannes Hellstrom in Stockholm and Laurence Frost in Geneva; Editing by Mark Potter

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