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Volvo defends GST pricing

Cut-price luxury: Volvo's flagship S80 T6 SE costs $4012 less than before under the company's GST price structure.

Volvo is stoutly defending its controversial new GST pricing strategy

19 Jul 1999

VOLVO is standing firm by its recently introduced GST price strategy - which has resulted in price drops of up to $4000 - despite being condemned by its European rivals.

The Swedish car-maker says it introduced the new price structure to prevent an anticipated sales slump in the lead-up to the GST.

Its rivals argue the move is little more than a thinly veiled attempt to boost sagging sales through discounting.

Responding to this criticism, Volvo Car Australia managing director Mr Jan Eriksson said: "There is no reason for Volvo customers to postpone their purchase because of the imminent GST".

"We have achieved transparency and clarity with the price drop. There is no smoke or mirrors." Mr Eriksson said the price structure was likely to remain largely unchanged even when the GST came into effect on July 1, 2000.

"It is not our intention to introduce a further price reduction, although exchange rates and the new tax structure may influence prices to some extent." Mr Eriksson said concerns that the price drop would adversely affect resale values were unfounded as the introduction of the GST would in any case result in lower residual values.

The price drop has been effected as a result of Volvo Car Australia discounting each car to the tune of $2000 and dealer margins being trimmed by $1000. The cars are also subject to $1000 less wholesale tax owing to their lower retail price.

Mr Eriksson said the full effect of the GST price reduction would be felt in August this year.

Although Volvo has sold just 1673 cars until the end of June, it aims to sell 4000 cars in 1999. Consequently, the Swedish car- maker will need to notch up more than 2300 sales during the second half of the year to achieve its target.

The company hopes the GST pricing and new budget-beating 1.8- litre S40 and V40 - both of which are priced at $39,950 - will enable it to register the required sales growth.

Supplementing the sharply priced line-up will be Volvo Car Australia's biggest marketing campaign ever, costing $3 million and running over a two-month period.

The advertising campaign will use television and cinema advertising, billboards and buses to promote the brand's new global tagline, "Volvo for life".

The television commercials, which will be screened during shows such as Friends and Dawson's Creek, will feature the Elvis Presley song "Got a Lot of Livin' to Do" and will target potential buyers in the 25 to 40 age group.

Although it is embarking on an ambitious advertising campaign, Volvo Car Australia is yet to appoint a sales and marketing manager.

Mr Andrew Moore, of Melbourne Volvo dealer Bilia Hawthorne, will fill the position until a permanent candidate is appointed.

Meanwhile, Mr Eriksson said Volvo and Jaguar - both of which are owned by Ford - could be sold from the same showrooms in the foreseeable future.

Mr Eriksson said the only stumbling block was that Jaguar is distributed in Australia by the Inchcape group rather than a factory-owned subsidiary.

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