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Will Volvo Survive Covid-19?

Will Volvo Bounce Back? When?

There is no doubt that the Covid-19 pandemic has had devastating effects on a global scale especially from an economic viewpoint. In fact, Covid-19 has led the world to face some of the most serious challenges serious World War II. Volvo is one of the automakers that was affected by Covid-19. In the U.S, Volvo’s headquarters are relatively close to New York City which was the epicenter of the early days of the pandemic in the US.

Volvo’s factories in Europe had to be shut down and employees forced to work from home. This move had a significant effect on how the automaker approached it marketing strategy and collaboration. Looking at the pre- and the post-Covid-19 virus period, there was a sharp decline in Volvo’s sales forecast.

How Covid Affected Volvo’s Marketing Plan

Volvo responded to Covid-19 by trying to understand just how severe the virus was and the kind of impact it would have on their business. After taking inventory of all the Volvo’s dealerships in the United States, it was discovered that almost 98% of them were closed. An assessment was done by the automaker to establish which dealerships could remain operational and deliver cars to people via online sales or even have customers have their cars serviced during the lockdown.

XC40
XC40

Of great concern by Volvo was the purchasing power of potential buyers considering the financial impact that the virus had on most households. Just how many buyers had the means to move from their houses during the lockdown and did they have the financial muscle to make actual purchases.

Results from the Analysis

The analysis from the company indicated that the sales would drop to between 60%-80% what has been forecast at the beginning of the year in the month of April (which was the peak for Covid-19). The rest of the analysis was that between May and June, the sales would still be low but a much improved level due to the expected declining death rates and new rates of infection from Covid-19. The month of July through to December was described by the automaker as the ‘New Normal’ phase that would be characterized by declining death rates, lifting of restrictions and resumption of business operations. However, Volvo greatly acknowledges that consumer behavior will have changed by year end. Consumers will have to be thinking twice before buying new cars, taking their vehicles for service or even buying pre-owned cars.

Impact of Covid-19 on Volvo’s Planning

One of the immediate responses of Volvo after Covid-19 was to preserve the company’s capital owing to the uncertain business environment. The most affected was the media fund for the months of April and May that experienced major cuts. By cutting their spending on media, the automaker was able to the cash flow and profitability despite the short term sales experiencing a massive decline. The overall long-term sales however would remain bullish with the company identifying new investing channels. Volvo also re-evaluated their ad copy especially in terms messaging to customer in order for the copy to match the current business environment.

Currently, Volvo is analyzing the overall business environment in the U.S and Europe to try and anticipate when business will resume normally.

The copy, especially on Volvo’s official website, needed to match the automaker’s current capabilities. Another key area that had to be changed was the market offerings in order to establish which offerings were viable and which ones were not working. Of particular interest to the company is regarding market offerings online versus using a dealership.

Take for example the Volvo Concierge Program that allows customers to chat directly with the company’s call center representative. It is expected that this monitoring is what will inform the decision to resume advertising.

Tumbling Global Sales

Volvo’s global sales have continued to suffer as a result of the continued effects of Covid-19. In the first quarter this year, the automaker sold 131,889 cars which is a 18.2% decline from the same period last year. In march 2020, global sales were 31.2% down compared to the same period last year with the company selling 46, 395 cars. This decline in global sales has been associated with the weakening demand in the U.S and the European markets. However, China has been showing some signs of recovery and the situation is likely to improve over time. Volvo’s sales in China in the first quarter were 20,780 cars which is 30.5% down from the same period last year. This was especially attributed to the low sales that the company recorded in January and February. However, sales picked up in March with showroom traffic showing signs of recovery. Volvo also reopened its manufacturing plants that were closed to contain the spread of Covid-19.

Impact on the U.S and the European Markets

In the U.S, sales were down 11.7% between January and March compared to the same period last year with the company posting 19, 485 car sales. This decline is as a result of the implementation of the stay-at-home order that led to a significant reduction in showroom traffic. In Volvo’s European market, things were no different. The automaker posted a decline of 18.5% in sales compared to the first three months last year to sell 70, 510 cars. The month of March was one of the most affected by a drop in sales as a result of restrictions in the UK, Germany, France and Italy markets.

Recovery During Post-Pandemic Era

Volvo expects profits and sales to bounce back to the pre-pandemic era in what has been described as one of the most positive recovery predictions by an automaker. In the first 6 months of 2020, the Swedish automaker had its sales tumble by a fifth although the Chinese market appeared to recover in July. In the face of Covid-19, one of the most affected strategic move by Volvo is the attempt to merge Geely Auto before they can list their shares on the public markets. In general, global car sales have greatly been impacted by Covid-19 and Volvo is not alone in the tumbling sales. There has been an unprecedented closure of factories and a massive decline in showroom traffic with the waning consumer confidence in the midst of economic crisis brought about by the virus. Automakers have been warned not to expect normalcy any time soon as it might take longer before things return to full recovery.

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