Volvo is developing an all-new Volvo XC90 premium SUV to replace the ageing first-generation model.

Volvo Cars of North America CEO, Doug Speck, told Automotive News the XC90 was one of the brand’s three core models and was important to Volvo going forward.

It had been rumoured that the XC90 would be discontinued altogether, but Mr Speck said the vehicle would receive an update before a complete redesign, which is expected around 2013.

The launch of the second-generation model was reportedly delayed after the design was sent back to engineers to improve its fuel efficiency, weight and handling.

It is understood the new XC90 will feature start-stop technology and potentially a hybrid system. The styling is expected to be similar to the smaller XC60 compact SUV, which has been popular for Volvo around the world.

The current-generation Volvo XC90 has been in production for almost 10 years, first rolling off the line in 2002. It was launched in Australia in 2003 and since then more than 11,000 vehicles have been sold Down Under.

So far this year, it has a 4.1 percent share of the luxury SUV segment, although at its peak in 2007 its share of the segment reached 9.5 percent.