Volvo tries to take hassle out of ownership with XC40

Elisabeth Behrmann and Tommaso Ebhardt
Bloomberg News

Volvo Cars, unveiling its first compact sport utility vehicle, is moving beyond eye-catching design and dashboard gadgetry by offering to eliminate some of the hassles of owning a car.

The XC40 will be available across Europe from the end of September for a flat fee of $840 a month, the Gothenburg, Sweden-based carmaker said Thursday. The two-year contract covers taxes, insurance, basic maintenance, and, where available, a concierge service to handle tasks like fueling, cleaning and delivering e-commerce purchases to the car.

The small SUV is “broadening the appeal of the Volvo brand and moving in a new direction,” Chief Executive Officer Hakan Samuelsson said in a statement. The company will ounveil the vehicle in Milan on Thursday.

The XC40 will go head-to-head with popular models like BMW AG’s X1 and Mercedes-Benz’s GLA in the rapidly expanding compact SUV segment. Demand for cars like Jaguar’s E-Pace, which is short enough for city parking, is set to jump some 47 percent to 1.68 million vehicles annually by 2020, according to IHS Automotive.

“The market for such vehicles looks set to rise,” IHS analyst Ian Fletcher said in a report. Customers “have transferred their allegiances from traditional hatchbacks, sedans and estates.”

By easing the burdens of ownership, Volvo is adapting to the changing landscape, especially in cities, where customers have more options for getting around and show less interest in buying a car.

It also demonstrates how companies increasingly straddle the twin roles of manufacturer and service provider — even as making money with offerings like car sharing remains a struggle. The XC40 will be shareable among an unlimited number of friends and family through a digital key that’s accessed by smartphone, Volvo said.

The vehicle marks another step in Volvo’s revival since Chinese billionaire Li Shufu purchased the brand from Ford Motor Co. in 2010. Since introducing the revamped XC90 SUV in 2014, the first car to be overhauled under its new owner, Volvo has seen its sales and profitability rise. It sold bonds last year for the first time, helping open the way for a potential stock-market listing.

At the same time, ties with parent Zhejiang Geely Holding Group Co. have grown as Li pursues plans to establish a global presence for the upscale Lynk & Co. brand, while spreading the cost of developing battery-powered vehicles. The XC40, which will later be available in an electric version, will be the first to be made on the compact-car platform Volvo developed with Geely. While manufacturing will kick off in Ghent, Belgium, the car will also be built starting next year in China and share the production line with vehicles from the Lynk brand.