Volvo Cars has been cooperating with Business Sweden on several projects across the world, from a partner search in Indonesia, CSR seminars in China and market support in Brazil to participation in business delegations and international trade shows. To consider the North American market, Volvo needed a pilot study, and Business Sweden came as a natural choice to execute the study.
A Neutral partner for objective analysis
"We needed an external, neutral partner, in a position to make an objective analysis. We had a very positive experience working with Business Sweden in other markets. Moreover, Business Sweden has the advantage of being present both in the U.S. and Mexico," says Ulf Nordelöf, Director of Strategy Development at Volvo Cars.
Today, Volvo Cars has production in Sweden, Belgium and China, with a smaller production facility in Malaysia. The establishment in the U.S. has long been an ambition of Volvo's, but for various reasons the decision to move forward had to wait.
"North America has always been a significant market with huge potential for us. At the same time, starting operations in the U.S. would be a substantial investment. When the dollar was strong, we had a positive exchange on the foreign exchange difference. And when the dollar was weak, we experienced quite heavy losses due to our large trading volumes in the U.S. At that point we did not really have the money for an expansion," Ulf continues.
"There’s never really a perfect time to make this kind of investment; it must be part of a long-term strategy. We are proud and happy to finally make that leap."
Choosing a market and a partner
The project was initiated in May 2014 and started with a macroeconomic study of the conditions in the U.S. and Mexico. Seven U.S. states and six Mexican states were measured against several factors, including workforce (associated costs and level of education), infrastructure, taxes, legislation, climate, security and quality of life. After a thorough comparison and subsequent weighting of the different alternatives, Volvo Cars decided to move forward with three states on the U.S. Atlantic coast.
The next step involved representatives from Volvo Cars, including Ulf, travelling around the selected states in order to meet with local investment promotion organisations, inspect the surroundings and discuss the conditions of the different locations. When two options remained, Business Sweden initiated the next project – identifying the best partner to build the facility.
"We wanted to keep the establishment confidential, and during the first six months it was only a handful of people that knew about the plans. Business Sweden could help with identifying and evaluating the different partners, anonymously, before we made contact," says Ulf.
At the end of the process, Volvo selected Charleston, South Carolina, as the location for the plant and the selected partner started the construction. In the summer of 2018, production will be up and running.
"Initially we are expecting to hire 2,000 people, but the number may rise in line with potential further expansion," says Ulf.
Presence is an important signal
According to Ulf, there have been two main reasons to establish in North America. First, the presence itself is a sign of a long-term commitment to the market. Second, from a financial perspective, the establishment offer a way to get off of the rollercoaster brought about by currency fluctuations. By having the cost of production and sales revenues in the same currency, Volvo avoids economic risk.
"We’ve had a fantastic response, both from the market and resellers which is very important. We want to become a part of the local community where we are making this investment," says Ulf. "On a personal note, I also believe that 'Made in the USA' brings great value to the American consumer – buying a car that you know creates jobs. In the light of the 2008-2009 financial crisis, I think this has become even more important."
Being a Swedish car manufacturer does not matter. The Volvo brand is very strong in the U.S., a tradition that began in the 1970s and developed throughout the following decades.
"Volvo has always stood for something positive and people want to be associated with these kinds of values. Almost everyone we met in the U.S. shared their own personal story about Volvo," says Ulf. "It was really great to hear about the relationships people have with our brand."