Volvo has spun four years of growth in Mexico. Even in 2020, amid the closure of plants and dealers due to the pandemic, the brand of Swedish origin grew 4%. In 2021, despite semiconductor shortages and global supply chain disruptions, sales were up 34.5%. This year, the brand owned by China’s Geely expects to maintain positive inertia.
The boost could come from a fortuitous event: the rise in gasoline prices that is already giving an unexpected boost to the demand for hybrid and electric vehicles, which are precisely the type of engines that Volvo has focused on.
The company announced in March 2021 that it would stop selling cars with internal combustion engines in 2030. By 2025, at least half of the brand’s sales will be from models with some form of electrification. The Latin American region, to which Volvo’s Mexican subsidiary belongs, is advancing by leaps and bounds with the objective.
In Brazil, where Volvo is second in the premium market after BMW, it no longer sells any 100% gasoline model. “Everyone has some kind of electrification,” says Luis Rezende, head of Volvo Cars for the Latin American region.
In Mexico, the goal is that 30% of sales this year correspond to electric models. “All our models now have a plug-in hybrid version and we have two electric ones: XC40 Recharge and C40,” explains Raymundo Cavazos, CEO of Volvo Cars Mexico.
Electric vehicle sales have been rising for several years, and the pace is picking up as gas prices rise. In the United States, where the price of fuel has shot up 79 cents in the last two weeks to $4.43 per gallon (3.8 liters), the trend is clear. In 2019, just 3% of motorists said they “intent” to buy a battery electric vehicle the next time they wanted to upgrade their vehicle, according to data from AutoPacific Research.
This rate rose to 10% in January, and nearly a quarter of people surveyed said they would consider changing the type of vehicle they buy if fuel prices continue to rise.
“The problems that arise over time become triggers or motivators for customers to say: I’m going to try the technology,” says Andrea Burgos, director of sales at Volvo Cars. “In the past we have seen how conjunctural events have done it.”
For example, the loss of hundreds of service stations in nine states of the country during January 2019, derived from the closure of pipelines to combat fuel theft, generated an increase of up to 50% in interest in electric vehicles. Three years earlier, a tightening of the Hoy No Circula program boosted demand for hybrid models.
“But I think it goes further. These situations that are beyond us do help, but we (manufacturers) have to do much more behind it,” adds Burgos.
Today, around 2.5% of vehicle sales in Mexico correspond to electrified models, according to Inegi data. However, manufacturers acknowledge that there are still a number of obstacles holding back the widespread adoption of electric vehicles by consumers, including range and charging times. Longer-range cars are helping to reduce consumer resistance. Volvo’s two electric models, for example, offer more than 400 kilometers of autonomy, enough to go from Mexico City to Puebla or Morelos without having to stop along the way.
Then there is the price: on average, a battery electric vehicle costs at least 500,000 pesos and those that are premium can exceed three million, although the manufacturers assure that the savings in fuel and maintenance services compensate the initial outlay.
This year will not only double the variety of new electric models to almost 40 – considering commercial models – but they will be available in more market segments, from city cars to SUVs and vans. Volvo, for example, has a goal of launching a new electric model every year. In 2021 it introduced the XC40 and recently introduced its C40 compact crossover , which it will only sell in a fully electric configuration.
Available inventory?
Volvo has managed to maintain a stable inventory of units, which in 2021 allowed it to position itself as the fourth player in the premium market in Mexico, just below the three Germans, and detaching itself from the fifth player Jaguar Land Rover. Now, in the midst of an unexpected global demand for electricity, the Mexican subsidiary is confident that it will have sufficient inventory.
“The vehicles that the corporation sends us could be elsewhere. But they are placed here in Mexico,” says Burgos.
