Supplying Volvo

Supplying Volvo

Publication Date: 28-May-2015
Number of Pages: 40

This report examines Volvo’s product and platform strategy, including the upcoming SPA and CMA platforms. The report also goes inside the Volvo’s purchasing strategy, including an in-depth interview with Lars Wrebo, Senior Vice President of Purchasing and Manufacturing at Volvo.

The report also looks at the company’s current manufacturing sites based in Sweden, its future production strategy for China, the relationship with parent company Geely,  and looks at OEM-supplier relations. The report is backed up with IHS Automotive production forecasts for the Volvo brand; the industry standard for automotive forecasting and analysis.

About the Report

Volvo is both one of the most iconic and best-known Swedish brands and also the last remaining Swedish car company, following the demise of Saab. It is now owned by Geely of China, and although a relatively small company, compared to automotive giants such as VW, GM and Toyota, it is nonetheless now on a growth trajectory and in the process of establishing a global manufacturing network.  In addition to its long-established factories in Sweden and Belgium, it now also has two new vehicle plants in China and an engine plant there too.The company has confirmed it will build a factory in the USA in the near future as well.

Volvo’s brand recognition derives in large part from its reputation for leading-edge safety technology and environmental compliance. It has long been seen, especially in the US, UK and some continental European markets, as the supplier of the archetypal middle class family car, especially its estate models. The advent of the original XC90 SUV and the subsequent smaller XC60 changed the company’s overall image somewhat, but the focus on safety remained paramount. In China, Geely wants to emphasise the premium nature of its vehicles, and with the growth of the Chinese market, especially for premium vehicles, there is every likelihood that the Chinese influence on Volvo’s future direction will increase.

Last year, Volvo’s global retail sales rose to nearly 467,000 units, rising from nearly 428,000 in 2013. Although production is growing in Europe and now in China, Volvo remains a relatively small player at under 500,000 units a year.  It is planning to raise its annual production volume to over 800,000 units and possibly more once the North American plant is confirmed. As part of the Ford Premier Automotive Group (1999-2010), Volvo had benefited from the scale benefits from Ford’s global purchasing power and also a wide potential source of engines.  Operating as an independent player,  and even with Geely’s  backing, Volvo has been on a process of re-inventing itself in many key areas, including increasing its manufacturing footprint, developing its own four-cylinder engines, and reorganising and expanding its purchasing department for example; the purchasing function had been subsumed within Ford Purchasing under Ford’s ownership, with a large number of key functions, especially cost analysis and estimating, having been transferred to Ford, reducing Volvo’s own capabilities in the area.


Financial Overview  
Volvo Cars, financial highlights 2014 vs. 2013   
Volvo Cars, retail sales 2014 vs. 2013   

Product and Platform Strategy   

SPA models could represent as much as two-thirds of Volvo output, and possibly more   
Europe and China will adopt the same manufacturing systems   
90 cluster models will be at the heart of the new Volvo   

Current Major Model Programmes   


Powertrain Strategy 

New 4-cylinder engines   
Modular concept    
Downsizing strategy continues with 3-cylinder version   
Reduced fuel emissions underpin Drive-E concept   
Plug-in hybrids   

Purchasing Strategy 

Country risk assessment   
Supplier awards and recognitions   
Geographic split of purchasing   


Lars Wrebo, Senior Vice President, Purchasing and Manufacturing, Volvo Cars   
Introduction and evolution of the purchasing function at Volvo    
Size and scale of purchasing function   
Government support   
Implications of the new platforms for manufacturing   
Directed sourcing, managing tier two suppliers  

Supplier interview – Marcus Nyman, IAC   

Production Strategy and Manufacturing Footprint  

A growing manufacturing network  
Recent changes to logistics arrangements in Sweden and Belgium   
Gothenburg – Torslanda   
Press shop   
Body shop   
Paint shop   
Trim and assembly   
In-house component assembly   
Sequencing by suppliers   
End of line finishing   
Skovde engine plant   
Floby component plant  
Suppliers and sequencing    
Incoming logistics   

Major new investment   
Global quality standards    
Teamwork is key    
Employee training    
Chengdu supplier network    
Environmental compliance   

Forward Model Program   


Figure 1: Volvo XC90 safety cage   
Figure 2: Volvo V40   
Figure 3: Volvo S60   
Figure 4: Volvo V70   
Figure 5: Volvo S80   
Figure 6: Volvo XC90   


Table 1: Volvo Cars, financials 2014 vs. 2013   
Table 2: Volvo Cars, retail sales 2014 vs. 2013   
Table 3: Volvo Cars, global sales by model, 2014 vs. 2013   
Table 4: Volvo vehicle production by fuel type   
Table 5: IHS Automotive Volvo Production Forecast (2011–2018) by Nameplate   
Table 6: Selected Suppliers on the new XC90  
Table 7: Volvo: purchasing split by country   
Table 8: IHS Automotive Volvo Production Forecast (2011–2018) by Country and Plant   
Table 9: Suppliers at Volvo’s Ghent Plant   
Table 10: Parts Volvo sequences at the Ghent Plant   
Table 11: Volvo Forward Model Program   

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