Despite problems in major markets such as Germany and the United States, Volvo Car Corporation is heading for record sales globally.

The company expects to surpass the 456,000 units it achieved in 2004, according to global sales and marketing chief Gerry Keaney.

"This will be a fantastic achievement given the problems we are experiencing in some markets at the moment," he added.

Main concerns are Germany, where the market is down 10% overall, and the United States where a weak dollar is putting the squeeze on margins.

"That said, the United States is still our largest single market with around 110,000 sales," said Keaney.

Volvo is reaping rewards in the emerging markets of Russia and China, however. "We will sell around 25,000 vehicles in Russia this year and that is up from just 5,000 two years ago.

"The premium segment in Russia is showing strong growth and Volvo has carved a nice niche for itself in the country and we are selling more strongly than Mercedes-Benz, Audi, BMW and Lexus - and you can't say that too often."

Volvo's success in Russia, Keaney added, has been built on the back of a strong dealer network having been early into the market.

"The S80 and XC90 are selling very well and obviously connecting with Russian consumers."

The company has also seen 70% growth in China where it has started local production of the S40 in Chongqing, in a factory shared with Ford which builds the Focus (with which the S40 shares a platform). It expects to build around 8,000 vehicles there this year.

Volvo has no plans to build cars in the United States to help mitigate against currency fluctuations. President and chief executive officer Fredrik Arp told the Automotive News Congress in Prague last week that offsetting a weak dollar was not the only issue to be addressed.

"By localising assembly you do get lower logistics costs, but there is no difference in raw material costs, such as steel. Also North American suppliers are not enjoying good returns right now.

"We have done the business plan and it appears to us that the pay-back for a North American assembly plant is pretty long."

Arp's main concern is regulatory pressure on emissions which vary around the world.

"Yes, we can develop hybrids but there are packaging and storage issues which require some $US200m per platform in development costs. That can put $8,000 on the cost of a car and the question then is whether people will actually find these vehicles acceptable in performance terms. It is a heavy investment for low volumes.

"There is still a lot of work to do on the business case for hybrids and we will continue to work with alternative fuels.

Sales and marketing chief Keaney said he would also like to see more government incentives around the world to encourage consumers to use alternative fuels.

Ethanol, he said, was growing and has established a significant presence in Sweden.

"We offer the option of E85 in the S40 and this accounts for around 13% of our volume in Sweden. We expect to see this increase to 20% when it is available in the C30.

"We are also leading the Swedish Touring Car Championship with an E85-powered S40. But it is necessary to get greater support from governments. We have the environmentally friendly products but outside Sweden there is not the infrastructure to put them on the road."

Keaney also said that the new C30 was giving Volvo a presence in the smaller market segments where it has not been before.

He added: "The car has been well received and we are learning about this market all the time.

"It is also an important car for us because is helps to lower the company's CO2 footprint. In a good year we are hopeful of selling 55,000 C30s."

Chris Wright

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