F Ford Motor Company

STOCKHOLM—The new sedan Volvo Car Corp. is set to unveil Wednesday carries the Swedish company's hopes of breaking into the small club of luxury car makers without breaking the bank.

Volvo is launching the new car, the S90, with the aim of competing with German gold standards such as Audi's A6 or BMW's 5 series. It can rely on new factories and in-house technologies developed since parting with Ford Motor Co. in 2010. It has also hired a German designer, Thomas Ingenlath, who has worked for Audi and other brands of Volkswagen AG.

But with a small budget compared with its German rivals, Volvo, now owned by Zhejiang Geely Holding Group Co. of China, says it has had to weigh every krona it invested.

Volvo's main concession to the traditional attributes of luxury sedans is under the hood: the S90 won't have a six or eight-cylinder engine, but a more modest four-cylinder already used in other models. Although the Volvo engine delivers respectable horsepower, company executives believe it may put off some luxury buyers who want more cylinders.

"Those who really want that, we will lose them," Volvo's head of marketing Alain Visser said in a recent interview, before taking a position at Geely Auto.

Volvo has a lot riding on the S90, the second car developed entirely under its Chinese owner, as it aims to boost sales to 800,000 by 2020, a 70% increase from the 2014 level. The company also wants to lift its operating profit margin to at least 8% at the turn of the decade from 2.2% in the first half of 2015.

The first fruit of an $11-billion investment plan, the XC90 SUV was launched in August of last year and has garnered 80,000 car orders to date, a solid performance according to analysts. The popularity of the new SUV has helped power a turnaround for Volvo on the U.S. market, with sales up 12.5% in the first 10 months of this year, following a decade of decline during which unit sales had dropped to 56,000 in 2014.

With the new S90 sedan, Volvo hopes to keep up momentum on the U.S. market and to prop up sales in China, where demand for its cars has fallen this year amid a deeper-than-expected economic slowdown.

The S90 is a litmus test for Volvo's three-pronged strategy of increasing both volume and profit while moving up market, because the company has almost no presence in the luxury sedan territory.

By its own admission, its previous foray into this segment, the S80—a car which has a starting price of $43,450 in the U.S.--has been a commercial flop.

Volvo has sold fewer than 600,000 S80s in the car's 18-year-career. By comparison BMW sold more than 370,000 of its 5 series last year.

Before taking responsibility at Geely Auto, Mr. Visser predicted the company would have to take eight out of 10 S90 customers from rival brands.

"If we fish in the pond of existing S80 customers, you know…by the time we've called all three of them, it's over."

Write to Christina Zander at christina.zander@wsj.com

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(END) Dow Jones Newswires

November 30, 2015 11:45 ET (16:45 GMT)

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