[12] For the 2000 model year, Volvo expanded the S40/V40's market to North America, where this range went on sale exclusively with the 1.9 liter turbo.

[15] In July 2000, Volvo updated the 40 Series ("Phase II"),[16] implementing a number of technical improvements, including improved engine management, diesel direct fuel injection, extra safety features, larger brake discs, new front suspension and steering, revised rear suspension, larger tyres and a wider track.

Other changes include improved fuel economy, new side-impact curtain airbags, updated seats and a new key with integrated remote.

There was also a 1.8 L (1834 cc) petrol direct injection engine provided by Mitsubishi as part of the platform sharing between the 40 series and the Carisma.

The low (2.0T) and high (1.9 T4) pressure turbo variants were positioned at the top of the motor range.

[28] These models featured the sports chassis with Nivomat body levelling, 17" "Arcadia" wheels, headlamps with black bezels, clear side side marker lights, body-coloured trim and chrome door handles.

[29] It competed in the British Touring Car Championship with Tom Walkinshaw Racing between 1997 and 1999 with Rickard Rydell winning the 1998 title.

The S40/V50 T5 (one of the several variants) features the 2.5 L B5254T3 (later B5254T7) (2521 cc) five-cylinder fuel-injected engine with a high pressure turbocharger.

There was also 1.8 L (Mazda L engine) petrol version available in the European markets.Volvo launched an advertising campaign for the S40 titled The Mystery of Dalarö, using a documentary style video approach.

[38] The S40 was the first Volvo car to be launched in China by the brand under the Changan Ford joint venture and commenced production in March 2006.

Improvements include improved audio systems, increased storage space and new safety features like emergency brake lights which flash rapidly during hard braking to alert traffic behind the car.

The new S40 also comes with optional active bi xenon headlights which point the light beam in the direction of the road as it curves (standard in SE Lux models).

There was also an optional BLIS (blind spot information system) camera located on the side mirrors which alerts the driver of passing vehicles beside the car.

The T5 model received a new engine (the B5254T7) with a performance increase of 9 hp (6.7 kW), giving an output of 227 hp (169 kW)at the crank The D5 engine became available with a manual gearbox offering 520 N⋅m (380 ft⋅lbf) of torque and an automatic transmission offering 490 N⋅m (360 ft⋅lbf) in the second half of 2007.

[39] In 2010, the new, larger, circular Volvo logo appeared on the front grille, in the United States, a manual transmission was briefly available with the T5 AWD version.

In North America, the naturally aspirated five cylinder engine, all wheel drive, and manual transmission were all dropped for the model year of 2011, leaving only the automatic, front wheel drive T5 in base and R-Design trims.

[43] (urban/extra-urban/combined) (*) Available from September 2010 Note updated: In 2012 the last variant of the S40 2.0 Comfort, was the same 2.0 Petrol Engine, but with a PowerShift 6 speed automatic transmition.

With this strategy, Volvo aimed to streamline its lineup and compete more directly with manufacturers such as BMW, Audi, and Mercedes-Benz.

Reports suggested that Volvo was considering a broader 40-series lineup, including a sedan, a wagon, a hatchback, a coupe, a convertible, an SUV, and a crossover.