Volvo has a new CEO. Or at least he has been there for. And now Håkån Samulsson wants the brand to go on a diet. In South Africa, 63 percent of the dealers are disappearing.
Volvo Cars implemented a new dealership model in South Africa from 1 February. The model means that dealers no longer own the cars. They now sell the cars on behalf of Volvo.
The restructuring comes at a time of major changes in the South African car market, particularly for Volvo and its dealer network. The situation is changing, even though the Volvo EX30 became the country's best-selling electric car last year.
Competition in the South African car market has intensified significantly. Chinese car brands in particular have rapidly gained large market shares. This has created significant pressure on established brands such as Volvo.
As a direct response to the new market situation, Volvo has made a decision to drastically reduce the number of dealers. As many as 12 out of the previous 19 Volvo dealers in South Africa are set to close.
This corresponds to a 63 percent reduction in the total network. The decision is based on an evaluation conducted by Volvo during 2024. The evaluation looked at sales potential and other factors related to the brand to select the continuing dealers.
Agent model and competition pressure Volvo
The closures are expected to be fully completed within the coming months. The entire process involves close negotiations with the affected retailers and their owners.
Unions have expressed criticism of the cuts, particularly concerned about possible job losses among employees at the affected dealerships. However, Volvo stresses that the affected employees are not directly employed by Volvo Cars.
Still, Volvo is working to reduce the negative consequences for employees.
"We are working with the affected dealers to mitigate negative effects on jobs, even if they are not Volvo employees, and we have no obligation to do so," a Volvo spokesperson said.
Volvo is already seeing signs that the situation is being handled internally by the dealer groups. "We are already seeing affected employees being absorbed by their own group or by other Volvo dealers that will remain open," the spokesperson added, according to TopAuto .
Despite the large reduction in the number of physical dealers, Volvo expects to maintain its sales level in South Africa. The goal is to sell as many cars this year as they did last year.
This demonstrates a strong belief in the effectiveness of the new agent model. It also shows confidence in the strength of the remaining seven dealers in the country.
The future of Volvo in South Africa
Volvo acknowledges that financial compensation may be required. The closed dealers may receive money, depending on the individual agreements.
– We will enter into a fair agreement with our dealer network, which may include compensation where applicable, Volvo Cars states.
The significant change for Volvo in South Africa reflects the global challenges facing the automotive industry. Factors such as digitalization, new sales models and increased competition from new players are shaping the future of the industry.
Volvo's strategy in South Africa is a clear example of how car manufacturers are adapting to the new times. They are constantly trying to optimize their distribution networks and adjust their sales strategies.
Can they maintain their market share with significantly fewer dealers and a completely new sales model? Only time will tell if the chosen strategy bears fruit.
Although Volvo is now cutting back in South Africa, the brand continues to develop new car models globally.
At Boosted.dk you can read much more about how Volvo still cannot do without the gasoline engine, and is backing down when it comes to electric cars.
