As GM announced a wave of auto plant closures in the North American heartland this week at the cost of thousands of jobs, Sweden’s Volvo Cars was expanding its U.S. presence, both in Silicon Valley and at a new South Carolina factory.
Like Detroit-based GM (NYSE: GM), which is shifting its attention from traditional auto manufacturing to projects like its self-driving car unit Cruise—a San Francisco startup GM bought in 2016—Volvo Cars is one of the flock of established carmakers drawn to the Bay Area to take part in its thriving mobility innovation cluster. While its headquarters is in Sweden, Volvo Cars is a unit of Geely Holding, a global automotive group based in China.
Volvo Cars announced this week that it’s moving into a former vitamin factory in downtown Sunnyvale, CA, where jobs will open up for hundreds of engineers, developers, and other staffers. The renovated 45,000-square-foot space (pictured) will be the new home for the company’s Silicon Valley Tech Center, which was first established in September of 2016 with a handful of employees at an office in Mountain View, CA. About 100 employees now working there will relocate to the new Volvo Cars center in Sunnyvale, which is nearly triple the size of the original facility.
In June, Volvo opened an auto manufacturing plant in Charleston, SC, which extends its car-making operations to a third continent. It also operates major plants in Europe and China. The Charleston plant may eventually employ as many as 4,000 workers, USA Today reported.
The Silicon Valley expansion will help Volvo Cars accelerate its drive to evolve from a traditional automaker to a mobility company that enhances its vehicles with self-driving technology and electric power, while incorporating infotainment, e-commerce, and other service elements into the consumer experience, CEO Hakan Samuelsson told a group of reporters on a conference call Thursday.
Rather than trying to lure Silicon Valley engineers to Volvo Cars’ head office and product development hub in Gothenburg, Sweden, the company believes it can more easily recruit talent to work in Sunnyvale, Samuelsson says. The result will be a speedier cycle of design development and testing—“a much faster iteration,” he says.
The company has already established collaborations with West Coast tech giants including Google, to co-develop infotainment features; with Uber, in a partnership to create autonomous vehicles; and with Amazon, which makes it possible for Volvo drivers to receive package deliveries to the trunks of their cars. Volvo Cars says its expanded base in Silicon Valley keeps it close to those companies, and to others that might also make attractive partners.
Asked whether Volvo Cars should feel threatened by the continual rise of new companies that are redefining the car industry, Samuelsson says no.
“We need them,” he says. Volvo Cars looks to tech companies to augment the human-machine interface of vehicles with features made possible by connectivity and software. “That’s really the core of the future,” Samuelsson says—not the vehicle hardware that had long been the focus of innovation. The car industry’s most transformational activity is now converging on the West Coast, he says.
“It’s not coming back to Detroit,” Samuelsson says.
In February, the company launched its Volvo Cars Technology Fund, a venture capital arm that has since made investments in two startups: Palo Alto, CA-based Luminar, a LiDAR sensing technology developer, and San Francisco-based FreeWire Technologies, which develops fast-charging technology for electric cars. Volvo Cars hasn’t disclosed the size of the venture fund, which will be moving from Mountain View to the new Sunnyvale center.
The Volvo Cars unit’s history dates back to 1927. It belonged to the Swedish Volvo Group until 1999, when Ford Motor Company of the U.S. bought it. In 2010, Geely Holding acquired Volvo Cars, which set up a head office for China in Shanghai. The company operates its main auto manufacturing plants in Gothenburg, Sweden; Belgium; China; and at the newly opened factory in Charleston, SC. Volvo Cars sold 571,577 cars in 2017, up 7 per cent compared with 2016 sales, the company reported.
The near-term strategy for Volvo Cars is still focused on serving individual car owners, rather than supplying or operating mobility fleets that deliver on-demand rides or transit-like services such as city shuttles on fixed routes. (GM’s Cruise, now valued by its investors at $11.5 billion, has been seen as a potential source of technology for ride-sharing fleets.)
But Volvo is experimenting with a tweaked model of ownership that resembles the way consumers often acquire smartphones. Under a new subscription program, Care by Volvo, drivers can pay for a package deal that includes the use of a Volvo model plus insurance and maintenance coverage. Subscribers can upgrade to a newer car model every year.
Samuelsson says Volvo Cars has set a goal of making every new model powered fully by electricity by late 2019. Its cars now feature some driver assistance features, but the company is aiming to provide a more advanced autopilot capability that would take over navigation when the vehicle is traveling along highways, rather than dealing with the complex conditions on surface streets with pedestrian crosswalks. When the autopilot is engaged, drivers would still keep their hands on the wheel, ready to take over. They would reassume full driving control once they exit a freeway.
Fully autonomous vehicles, such as driverless robo-taxis, are still a possibility for the indefinite future, Samuelsson says. Innovators will need to guard against fielding such autonomous fleets before their technology is capable of preventing accidents.
In a March crash that caused possibly the first pedestrian fatality involving a self-driving vehicle, an Uber-operated autonomous car with a backup driver aboard struck and killed a woman in Tempe, AZ, the New York Times reported. The car was a modified Volvo XC90 SUV. Uber suspended its road testing after the incident.
Samuelsson says that although 90 percent of vehicle accidents can be traced to human factors, any injury or death due to collisions involving autonomous vehicles could cause a popular backlash against the technology in general.
“It can kill a new technology that could save a lot of lives long-term,” he says.
Photo courtesy of Volvo Cars