No budget pricing for Volvo V40

Volvo's V40 hatch will not be a cut-price proposition that "might devalue the brand", says Volvo Cars Australia boss, Matt Braid.

Speaking with motoring.com.au ahead of the Aussie media's first drive of the new premium small hatch, Mr Braid admitted rumours had reached him that Mercedes-Benz will price its new A-Class as low as $35,000. Whether true or not, Volvo won't be following Benz down that path.

"If Mercedes-Benz can do the A-Class at $35,000, good luck to them," he said.

"We'd be reluctant to [follow that line]... We're confident in this car... and therefore we want to market it, not give it away," Mr Braid stated.

Mr Braid said that cutting the price of the V40 too far could "devalue the brand", and Volvo needs to "keep the brand consistent, keep it strong".

"I think we'd struggle to get below $35,000... We arguably could, depending on specification [but that is not our intention]."

The problem with "going below that point" Braid contends is it changes the perception of the brand — to one more likely to compete with "high-end Japanese [cars] and VW".

Nothing could be further from Volvo Australia's plans for the V40. The V40 won't be sold on 'value' per se. It will be more of a premium offering, and priced accordingly, he suggests.

The precise make up of the V40 range in Australia is not yet set in concrete. According to Mr Braid, there will be at least two levels of trim — and possibly a third, high-grade level at the top.

"We're negotiating the final specification now," he told motoring.com.au, also indicating that some V40 options in Europe are likely to be standard across the Australian-spec range.

"We don't want to have a bare-bones car for customers," he explained.

"We'd rather market [V40] as a good looking car, well specified, luxury in a compact package — rather than being a small, bargain-basement, entry-level car...

At seven for every Aussie dollar, the Swedish Krona (SEK) currently favours importation of the V40 into Australia with enough room for the importer to move on price or specification and remain competitive with rivals from other (European) markets. This is despite the downturn in the value of the Euro against the Aussie dollar.

"That allows us to be a bit more flexible on the pricing [of V40] particularly," said Mr Braid.

But Braid also cautioned that for European-sourced vehicles, the landed costs only allow retail pricing to move so far in a downward shift.

"Because it's the lowest price point of car in our range — as are all our competitors — you don't have much fat there at all... if you've got to move. So you've got to be careful.

"The percentages across those smaller cars are very tight," he stated.

Volvo doesn't have specific contingency plans to deal with a cut-price Benz A-Class, Mr Braid said.

"Not at this point in time... If they launch with a standard car, say 35 grand, [and] it's fairly bare, then we're not going to look at it too much. They'll get a lot of kudos for the price... but the reality is if the customer goes in there and it hasn't got this, it hasn't got that, questions [will be] asked.

"We'd rather present our car, the V40, like we do with the XC60; XC60 has been a little bit better specified [compared to competitors] for the price.

But getting buyers in the front doors of dealerships is half the battle for the retailers. And a keen price on the A-Class gives Benz dealers that added taste of honey to entice those new to the brand. Once they're settled on buying a car — in the showroom and possibly based on a low price — it's then harder to for them to pull out of the mindset that they will buy a particular make and model, even if it's going to need thousands more spent to bring it up to the equivalent spec of a rival.

"It is something we've got to be aware of," replied Mr Braid.

"That's where we rely on the media reports initially from Europe — obviously very much on the basis that our car is going to be a true competitor [to the A-Class]."

Using S60 and XC60 as examples, Mr Braid argued that Volvo can win hearts and minds with the V40. There'll be early adopters and brand loyalists, but V40 has what it takes be "placed on that shopping list".

A springboard for sales of the V40 might be an unlikely choice — Volkswagen. Mr Braid offered his opinion that the V40 could acquire sales from cashed-up buyers who want a car like a Golf, but with more to offer. Ironically, that turns Volkswagen's current TV advertising campaign on its head, with the Volvo exec effectively suggesting that the V40 will be 'like a Golf', only better.

There has already been talk out of Europe that the V40 is Volvo's 'Golf competitor'. In the Australian context that suggests the V40 should be on the shopping list for anyone in the market for a small car, whatever their budget might be. It's a false analogy based on different market perceptions of the VW small car, Mr Braid explained.

"I think you're never going to buy a cheaper Golf than what you buy in Australia. So I think Golf in Europe... is a bit higher than what we've seen in Australia, from the point of view of transaction price.

"One thing we look at with Golf is the [sales] volume in the segment. As a volume leader it's fantastic. Of course, if you're watching it from that point of view... if we can get some people to upgrade from a Golf — they want a bit more design, luxury features, something a bit different — then that would certainly encourage them to come up [to a V40]."

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