Volvo showed two new concept cars that will pave the way for the upcoming 40 Series the company hopes will expand its sales footprint.
"The new 40 Series cars have the potential to improve our market penetration in an important growing segment," said Håkan Samuelsson, Volvo's president and chief executive.
The smaller cars will be based on Volvo's Compact Modular Architecture (CMA) unveiled in October. Volvo is expected to begin producing its first smaller car in 2017.
Volvo will produce a "range of vehicles" in the smaller luxury segment that "combine bold exterior and interior design with industry-leading connectivity, electrification and autonomous drive technologies," according to the Swedish automaker.
Volvo plans to offer a battery-electric smaller car and a plug-in hybrid model. Volvo has set a goal to sell 1 million electrified cars by 2025 around the world.