#27 Volvo UK: Battery Fire Risk Means We're Recalling 10,500 Vehicles

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1:22Nicole Melillo Shaw:Hello and welcome to the Big Boss Interview Podcast. I'm Will Bain and if this is your first time with us well welcome and uh this is basically where you can hear in-depth interviews with the biggest business leaders right across the industries that impact your lives and sean farrington has done our latest interview and and sean we're back with the car industry this time no industry been turned perhaps more upside down than this one in the last few years no and will you will well know whenever we start talking about the car industry on the the programs that we present we get a lot of reaction particularly when it comes to electric car policy there's been so much of that in the last year in particular and that very much came up when you are speaking to the boss of volvo here in the uk nicole malillo sure runs volvo here in the uk they don't have a manufacturing presence so it's it's all about selling those cars through well they're not treated as dealerships anymore now it's more like agencies so that was one interesting radical change that we discussed has happened at Volvo in the last few years.

2:26But we really did get into then, what is it that customers want right now? Because we've seen the likes of Stellantis that have Vauxhall and Peugeot under its watch and loads of others say, do you know what? We're going to start going a bit more towards diesel now. Customers aren't so keen on electric as we previously thought. So we'll hear from the Volvo boss about what they make of that. They're an interesting business as well, owned by Chinese owners, but yet their biggest markets are in America, China, and actually the UK in third. So balancing all of that, what you learn from that running Volvo here in the UK.

3:01And Nicole Melilla sure has an interesting background as well, having come from running brands elsewhere, the likes of GlaxoSmithKline, coming to the car industry. So another interesting perspective about how you get into that industry from perhaps a more non-traditional way. And then on top of all of that, you may well have seen headlines in recent times about them actually having a product recall, having to recall 10 ,000 or so of their cars here in the UK because of battery issues. We'll get the very, very latest from Nicole Malillo-Shaw on that and plenty more. So let's have a listen.

3:41Nicole, thank you so much for joining us on Big Boss Interview. Thank you. Looking forward to it. There is loads to talk about in the electric car market, isn't there? In particular, we do shows every day and it's one of those topics, whatever angle we're taking on it, that engages the audience and we get instant reaction on it. Have you found that? You've had quite a varied career with different types of brands that you've worked with and different industries. Do you find that? I completely understand. I think the first thing to say is, I've only been in the industry six years. I can completely identify with the listeners that were contemplating which car to buy next.

4:18And the reality is, it's a big habit change. And like anything, it takes a long time to get your head around that. And cars are just another example of how people have to make a decision that is going to serve them for three to four years. So it is a change. I think the momentum is there. It's the biggest growing segment. It's growing over 20 % year on year. But actually driving one and taking that step, I completely resonate with that hesitance, I suppose, to move into that direction. But look, I mean, from a manufacturing point of view, range was the concern maybe two or three years ago. Am I going to be able to get from A to B with the mileage that the car will do?

4:58Manufacturers have improved on that and therefore it's probably less that now. I mean, we're about to launch or we've kind of launched, but about to get our brand new EX60 into the market this summer, which is going to do over 500 miles. so that stops that conversation of can I get from A to B and I think if I made that... It doesn't quite stop it though does it? People still will want to see infrastructure in place as a backup you know you never quite know what's going to happen on your journey. Yeah and I guess that's the point so range is first infrastructure being the second thing once you know your car can do 500 miles to contextualise that London to Inverness you probably know you can get from A to B without having to worry too much but absolutely infrastructure is on the agenda and And it's something I'm working really hard with the government, along with some of my colleagues, to really make sure we've got some robust setup.

5:44Because that jeopardy of being certainly on a motorway and not knowing that you can confidently charge, or maybe you haven't tried it and it's all in your head. But the reality is that we need to give more confidence on infrastructure. But electrification, it is the way forward. The cars are better. They do drive better. and we have for example in Volvo we have such an amazing pipeline of cars coming through that once people experience it it is a whole different mindset around driving an electric car. The reason I kicked off with electric cars is because for Volvo that has been a big part of your story in the last few years hasn't it?

6:22Yes absolutely I mean pipeline wise in terms of all the cars that we make and everything we're geared up to make we could be 100 % electric tomorrow we're waiting for the adoption curve to get to that level that was your aim it is too long ago though 18 months ago it was very you know explicitly said actually those we're not going for 100 % it's going to be more 90 % 90 to 100 based on consumer adoption not based on us so as I said if we wanted to if everyone wanted an electric car tomorrow a Volvo we would be able to serve that I think the challenges and the reality is we just talked about the uptake has been a bit slower than that so I think there's a lot of things happening which means that adoption is moving forward people are starting to get behind it I think there's still a feeling of I'll have one more petrol before I fully decide or one more hybrid and I get that and it is for us as manufacturers to give more confidence around moving to electric so range being one of them infrastructure and working with the government to make that better cost of charging being clearer and also I think we make it unintentionally a little bit complicated you know there's initiatives from the government that are supporting in one way and then retracting in another which means that if you're I always say people aren't thinking about cars all the time we are I am but if you're not thinking about cars all the time and you're coming to decide what to take next there's lots of different information and it's my job and it's the industry's job to make that more straightforward so people can make that right decision for them.

7:47Do you see direct consumer customer habit changes when in the summer the government announces subsidies for some electric cars that are out there and they're the headlines for a day or a week? Do you directly see people getting more confident when they see that? Yes I think absolutely cost is one of the things that helps move the dial and we've got a couple that you're referring to, which supported up to£3 ,000,£3 ,500, that helps move the conversation on as well. I think the true test of whether we're moving in the direction is whether we get more retail customers in. So fleet, the whole benefit in kind proposition really helps and makes it quite a straightforward decision.

8:33This is sort of company car type. Exactly. Where salary sacrifice benefits there have been reduced. Exactly. So that's one. We've had the mentioning that there'll be a pay per mile on the horizon if you have an electric car. So last summer we might have seen the subsidy headlines, but actually as the months went by, there were some going in the opposite direction. Which is what I mean by the confusion, because you're making a decision and you've got one kind of carrot and then one stick and all of it. Do you see that in the numbers? I mean, well, obviously, as I said, it's a growing segment. So we see it's moving in the right direction.

9:05What I'm more interested in is consumers' confusion at the point of purchase. And that's the bit where in some cases they say, do you know what, what happens with confusion? You default to something you're more familiar with. So, yes, it's growing. And we've got a growing number in the fleet space, in the business space. But a retail customer is still a bit more hesitant. And cost helps. But I think that there's still a feeling of, do you know what, that'll be my next car in next two, three years time. And I'll go for one more. And that's what we need to do that. Sorry to interrupt you. In your numbers there, just in your sales, how does that come through compared to what you might have expected a couple of years ago?

9:44When you say you've used the word sort of slower a few times, what are you sort of expecting a customer to have done and actually what do they end up doing? I think, again, there's probably a bit of talking to ourselves in the industry. We experience all kinds of cars every day. We drive them every day. So we get very much on the excitement curve around what's coming next. And then you have to remember, probably not dissimilar to moving from a gear car to an automatic, that change to us in the industry feels quite straightforward. To someone who hasn't experienced that, it's a little bit intimidating.

10:16So I think that what I've seen in numbers is definitely, as I said before, is growing. And the first year of us launching our EX30, which is the lower price car for Volvo, we hit over 28 % or 27 % of our volume being electric. So we have ZEV mandate as well from the government, which means we have to hit a certain threshold. We're very supportive at Volvo of the direction of that because, as I said, we are electrification centric. But then I guess the EX30 was a big building block towards that. And then more recently, it settled down to more like 22 and a half percent. So after that initial push, a couple of things have happened.

10:53Firstly, there's a lot more competition, over 160 more cars in the market. So more brands, more prevalence, a lot more to choose from. And some of those are not electric. So, of course, that is then making people make different choices. And I really believe in this coming from, we talked at the beginning about different industries. This is where brands need to lean into what they're about. So knowing what your brand building is, what your heritage is all about, and really making sure that you get behind that. Because for Volvo, it's all about safety. And if we're really clear on that, we have a point of difference.

11:28The moment that that gets diluted, then the conversation for somebody who's considering a car goes down to price. What's the cheapest? I don't really understand. They're probably all decent cars, so therefore I'll pick the cheapest. And that's your pitch to customers. But the way it's playing out, you know, there are lots of other bits of data, anecdotes around that show that the customer habits are slowing. So not necessarily heading in the opposite direction, but not going at the pace expected. Stellantis, another major car manufacturer with lots of brands that people will be aware of, Peugeot and Vauxhall, Citroën and the like.

12:07They've recently said we're actually going to, in certain parts, start going back to diesel a bit more because the customer, we're following what the customer wants. I mean, you've got the same customers across the board. I totally understand the hesitancy. I think, look, the whole point of it as well is for sustainability and have a better planet. So, of course, we're not just doing it for that sake. My experience is that the more people get behind the wheel of an electric car, the more they go, actually, this is a better drive. we're rooted in petrol that's what we've grown up doing that's what we're familiar with but actually when certainly if you have off-road parking not having to go to petrol station is actually really convenient it's cheaper as well so it's about half the cost to charge at home so all of that again going back into that levels of confusion all of that when you wrap it all up makes it a better proposition but it depends what you're hearing and obviously you know media headlines sometimes interrupt that thinking but when it comes down to it it's a better car it's a better drive it's better for the environment and I think that you know Volvo's ambition is to really move that forward.

13:12But you need the money to be able to do it do you find that it's you know even all of these years on into the electric car conversation it's still the haves and the have nots if you can afford a house that has a drive if you can you might live in a more affluent area that has more charging infrastructure around it, that you might be able to afford some of these cars that aren't cheap to take advantage of the subsidies in the first place, that actually all of this is geared towards those on higher incomes? So to a degree, you can... So firstly, let's take the off-road parking. You can actually charge for significantly less at home.

13:49So that's important to say that, first of all. When we talk about the X60, for example, we've line priced that with a hybrid car. so therefore we're not charging a premium for an electric car which is again another helpful step towards it but line price to use your phrase i've never used that before but i'm getting into i'm getting into the lingo in line with another one of your your hybrids would that be yes because you know a new volvo i'm guessing that doesn't necessarily come cheap it doesn't it's a premium car so no it doesn't and we've spent our investment making sure we're ahead of the curve in innovation to really drive our safety credentials.

14:27So we don't do innovation for the sake of it. It's to make sure that everything we have in the car is to support safety. So, for example, our electric seatbelt, our seatbelt that we've brought out in our electric cars is really adaptive to you and your physique to make sure that it's even safer should there be an impact or the anticipation of an impact. But you need to earn a fair bit more money to be able to afford those safety benefits, if that's what you're talking about. You do, but then, as I mentioned, we have the EX30, which is the kind of more entry price point. But going back to the point that you were making earlier, I think there's a couple of ways of looking at it.

14:59There's the total cost of ownership, which for electric cars being charged at home is significantly cheaper. But then there's the whole point that we need to work with the government on, which is the cost of rapid charges and being on the go. Because then if that gets addressed, then it doesn't really matter if you have off-road parking or not. It's that ability to do that at a reasonable cost. And that's the kind of support and movement we're doing, certainly from my perspective, but as a group as well. Does it feel to you when you see all of those government policies that actually that they are directed towards those who are better off having the benefits of electric cars?

15:38I think the starting point is around this whole ZEV mandate and really getting a high percentage into electric and then which I'm very supportive of and we are as a brand. And then working backwards, I think that there is today probably a better setup for those who've got off-road parking. But I think, you know, if you look at the industry as a whole, you can get electric cars across different price points. So it comes back to the charging and that's why that conversation really has to be addressed. Just as almost a brief interlude, when we talk about ZEV targets, this is the proportion of the amount of cars that you sell in the UK that need to be electric.

16:19Electric, exactly. This is a government mandate to make sure that the industry is moving in the right direction when it comes to electrification. And those targets are quite steep and the fines are really steep as well. Too steep? So, well, they come into play in November this year. They've been reduced from£15 ,000 per car to£12 ,000 a car. So they've gone down, but that is a lot of money. I guess what it's doing is, and the conversation that we're having as a manufacturer side, less from a consumer side, is the cost of electrification. Because you are better off absolutely hitting those numbers than paying the fines.

16:52So, of course, the important part there is the race to make sure you hit that number, which gives consumers lots of choice. and probably competitive options. But, you know, back at the manufacturing sites, there's been a huge amount of investment to get electric cars where they need to be. And then discounting at the other side to hit those numbers is a challenge. So just to almost wrap up this little part of the interview that we're doing, will Volvo be producing and selling more diesels? Diesels, absolutely not. Absolutely not. We discontinued diesels in 2024 and in the UK in 2023. So that's been something that we've stopped a long time ago.

17:33You've mentioned a few times various models that you have of Volvo. And the EX30 has, even in recent days, got a few headlines that you might not have wanted when you're setting out looking to sell a new car. And this has been to do with battery issues, with certain versions of that EX30, long range versions, some of the long range versions, where effectively you've said to customers you need to be a bit careful about charging it in enclosed spaces we advise you actually not to charge above 70 and there's been some recalls this week can you just explain what has gone wrong there yes and i think the first thing to say is that it's never good to have this kind of a spotlight and i completely empathize with anyone who's experienced this we have a proportion of our ex-30 cars that have had risk of catching fire when they've been charged beyond 70 percent so as a safety brand and safety being our top priority we have advised customers not to charge beyond 70 percent until we find a fix so again there's two points there one is i appreciate it's quite scary to hear that message and two is it's very inconvenient to charge to 70%.

18:48So we've been working really hard and quickly to get to a solution, which we now have. We've found the root cause. And I expect next week to be able to get those cars in and start to fix them. So could you give a bit more information on the recall here in the UK? So the recall has been that we are going to contact the customers who've had that issue to then look at how we fix the battery modules. So I guess the important bit is that there's been a tiny percentage that have caught fire globally, 0.02%. So a tiny amount, but we still take it incredibly seriously. There's been no fatalities. And, you know, actually, when we talk about this situation, although it is far from ideal, and I fully recognise that, and as well as not being able to charge beyond 70 % while we get to this fix, there is significantly fewer electric cars that catch fire than petrol.

19:42But again, And going back to that familiarity point, it's something that is, while people are deciding if they want to move to an electric car, it's a headline grabber because, of course, it's a new thing. And it's another reason to be cautious. But in reality, when you look at the data, you know, petrol is flammable. There's much more concern around that area. So we're on a journey, as with every OEM or every manufacturer looking at batteries now as we move towards electrification. and in this instance it's been unfortunate but we have found the root cause and we will be contacting people next week.

20:16And so how many cars in the UK would that be? 10 ,000, 10 ,500. In the UK and what sort of time horizon would people expect that to be fixed within? So there's a couple of things it depends on the amount of parts which I'm just getting the information from so how quickly we can resolve it. The important thing is we've found the root cause because it means we know what we need to do and then we just need to get the parts in and start to fix that. we've given customers free charging as a result as well to make sure that they can have some recompense in the meantime so I can't answer the question around how long it depends on how quickly the parts come through but I do know they're going to start coming through with the third week of March.

20:51Given how much you know you talk about Volvo safety and your you know sort of interest in the car industry having been in it for the last six years when that news dropped to you that there was an issue with these cars. When did that happen? And I'm just interested as to what that moment is almost like from your perspective. Absolutely. I mean, against everything we stand for, and I suppose the testament to how we operate is, despite the fact there's been no fatalities, despite the fact it's been a tiny amount, there's been four fires out of the 10 ,500 cars, we immediately took action and immediately looked at what we needed to do to stop it happening, which was the 70 % charging point.

21:33And we did that straight away rather than saying it's only been a small amount. We don't need to panic because safety is at the core of everything we're about. It's really important. So, yeah, absolutely. Late December when this came to my attention, absolutely not something we wanted to be happening to our brand. But it's about what you do next. And I think that's what people identify with is how we support them quickly next. Do you see a knock on effect into confidence in a brand? You know, you've got a new another model coming out on its way, as you've mentioned. that actually there can be a ripple effect because people are understandably sensitive to headlines around a new technology that it might even play into some of the automatic concerns that they have about having a massive battery sat on their drive or in their garage instead of petrol or diesel car.

22:19I do, and I think this is about context again. I think when you get a headline, as you say, it's very easy to respond to that headline. When you get context, and it's interesting reading some of the groups, the forums that we have with the EX30, is you get a mixture of people, you get some people panicking, understandably, because they maybe understand less about it. And you get some people who say, actually, they're the safest car ever, electric cars, that is, compared to petrol cars, it's just we don't hear as much. So it depends which side of the coin you're coming from. I think when it comes down to it, it's far from ideal.

22:53As I said before, it's not something we want to be happening. And it's something we've gone back and worked very closer with the supplier to rectify but it's about that context it's about us making sure we give accurate information and we get a solution quickly and just because there be a few questions that people would have on this are you still selling these cars that were made in that sort of batch or that era no so we are so the new cars that we're selling are a different battery cell module so anybody buying a new car now it won't have that issue onto tariffs which again is something that as well as I say capturing the imagination that's probably not the term many people in the world of business would use about how the US administration at the minute is approaching the way tariffs are implemented and we heard the Supreme Court recently in the United States say all of the tariffs one large amount of the tariffs that were implemented last year actually illegal so then Donald Trump puts in place a temporary 10 % tariff that they may well look to increase to 15 % All of those numbers aside, what is this doing to Volvo's global business right now when this happens?

24:03Well, I mean, so firstly, context wise, the US is our second biggest market, China being first and UK being third. So we are a really big part of the global piece. On the US part, having the second biggest market in the turmoil of some of these tariffs is not ideal. And what our industry needs is stability. and I think we've got at the moment we've got the tariff situation going on we've got hyper competition we've got the electrification piece that we've spoken about so it's far from stable at the moment there's a lot going on there's a lot of change and the reality will be that how things play out in the next one to two years but from a an automotive perspective if we have challenge in the US around tariffs it means two things really one the regionalization piece so we are setting ourselves up to build cars where we sell them so that means building our ex-90 in the us where it's likely to be bigger volume and then we have xc40 xc60 in europe and then we have xc70 in china so get that regionalization piece right that will really help and if some of those moved over the years where you may have built all of one car in china yes but that you've actually move to Europe to try and avoid some of these tariff costs?

25:15Not necessarily from a tariff perspective, more from a proximity to where we sell. But yes, so EX30, for example, we manufacture in China. We've just, as of last summer, moved it to Ghent in Belgium to make sure that we've got a better setup to be able to get cars quicker to the customer. So exactly that. And the other thing is, you know, from my perspective, when we're looking holistically from a global perspective, it gives the UK even more focus because, you know, China's the biggest, US is in some turmoil with obviously the tariff situation, and then the UK is next in line. And we have fantastic momentum in the UK.

25:50So since we've launched our direct model a couple of years ago, which was essentially a direct to consumer model. So this is the old school dealerships way of doing things where those dealerships can set the price once they've bought the car from you or whoever that's not what you use anymore. And that is essentially called wholesale so the industry being on wholesale and us moving to a direct model basically changing what has been in existence for 100 years which is no mean feat but changing that model and growing by 40 % to then have growth in market share as well and keep that stable that's been really important for us so because we have that momentum collectively when we're looking at global numbers then the UK is definitely a bit more on a platform because obviously it's important for us to keep that momentum going as well as the third biggest market.

26:41Yeah and given the importance of the UK as a market to Volvo is the potential are there discussions within Volvo about potentially setting up some form of your manufacturing supply chain in the UK getting even closer to that market that's important to you? That's not a conversation that I can talk about today but it makes sense when you talk about it from a customer point of view of course I think what we are really good at doing particularly in the direct model is having stock and pipeline that is more connected to our end user so what I mean by that is through this model I understand my customers even better so I'm able to make sure that the factory build what we need so that you're not waiting much more than one or two weeks to get your car so that's really helped us get from a stock position to someone actually having their car on the drive which is really important and that's only one of the elements I guess the data bit and being able to talk to you just talking about the wholesale piece actually as you described it going into a dealership and having potentially a haggle around the price and you know people go off behind the scenes and have a chat about a price and come back and say what about this all of that is the thing that we wanted to move away from so the whole direct proposition is having transparent pricing meaning I understand you better I can then also have the right stock and then I can interact with you throughout your journey rather than just it's three months off you renewing what would you like to buy and actually we have a bit of nurturing relationship so that's now coming into the third year and really important for us.

28:13Any signs that in maybe even certain parts of the country you might move back to dealerships given that you've had a bit of time for this to bed out and figure out you know what this pretty radical way of I know it doesn't sound that fancy but it is compared to how the car market has worked in the UK for many years and for Volvo. Yeah and importantly we still have dealerships so dealerships are core to our proposition core to our growth. Acting as agents. Acting as agents exactly and that's the difference because we want it to be more of an experience we want it to be more of a going back to my experience of working in healthcare you go to the pharmacist as a trusted expert we want it to be more like that rather than a price discussion that feels sometimes a bit disingenuous what you want though might be a bit different to the customer and also the competition is meaning you have to do and if there are more of these cars at lower prices coming on the market can you envisage a point where you might have to say actually we do need to start allowing dealers somehow to be able to change the price regionally depending on where take-up is?

29:17I think any kind of marketing 101 about brand building is about being able to control your brand and I think the more disparate it gets by either someone over here does it one way and someone over this side of the country does it another way the more your experience for your brand is inconsistent so in answer to that question we've got some really strong momentum We've grown market share from 2.5 % to 3.5%, which is significant, and held it there. So being able to move the dial that way, and now our focus is really on experience, it feels like we've got something really special. So that's what I want to continue focusing on.