A dispute has broken out over brand strategy between Volvo's boss and his Chinese employers.
On the one hand, Geely believes a luxury makeover will drive Volvo sales in China, while the carmaker's Swedish CEO believes sophisticated consumers prefer subtlety.
Companies looking to sell high-end merchandise in China have long pandered to aspiring consumers’ taste for excess and “bling”. Li Shufu, billionaire chairman of Volvo and Geely, had hoped to achieve this that with his re-branding of the understated Swedish marque, but is now facing resistance from executives who believe conspicuous consumption in corporate China is coming to a close.
Li’s plan was to produce a large premium sedan to rival German luxury cars, like the Audi A8 and BMW-7 series, which appealed to newly rich “show offs”. The chairman has pushed to upgrade technology, improve design and stretch out the S80’s wheelbase for buyers who like to be chauffeured in the back of the car.
However, Hakan Samuelsson, CEO as of last year, believes Volvo’s smaller, four or six-cylinder engines will have little appeal to consumers who are expecting V-12 or V-8 units. Technical specifications aside, he also told reporters at a plant opening in Chengdu that “showing off has never been part of the Volvo brand.”
Samuelsson believes the shift away from flashy goods to more refined products is a trend that started in many countries years ago and is now visible in China, especially as anti-corruption campaigns are prompting people to limit luxury spending.
Conversely, a member of Li’s team reckons “there aren’t many people in China today with good taste. Mistresses love BMWs. Coal mine owners and property developers drive Mercedes. Those rich people like to show off.”
The issue of changing tastes in China reaches past the car industry. Since Xi Jinping’s push for frugality has taken abalone and Hermes bags off the menu, luxury producers have to find new ways to appeal to high-end consumers.
For lubricants marketers, changing tastes may also mean rethinking the way products are pitched at consumers. For example, instead of buying on price and brand recognition alone, savvy new consumers may begin to look for additional product features and specifications. The buying experience is also likely become increasingly important, according to research from Credit Suisse.