Volvo plans new China car plants

Volvo plans new China car plants

Published: February 25 2011 12:33 | Last updated: February 25 2011 12:33
Volvo Cars, the Chinese-owned Swedish carmaker, said it would open a new plant in China in 2013 and might build two more, as it announced its strategy for the world’s largest car market.

The company said on Friday that its board had decided, pending Chinese authorities’ approval, to build a plant in the south-western city of Chengdu with capacity to produce 100,000 cars a year.

Volvo said it would “continue investigations” for a plant in Daqing, in China’s north-east, and that it might build a third plant at another undisclosed location.

“The strategic direction is for up to three plants in China,” a company spokesman told the Financial Times.

Volvo said it expected to make the decision on the Daqing plant in about six months.

It said it was establishing a new Chinese headquarters and centre for product development, design and sourcing in Shanghai.

The carmaker added that the expansion into China would not affect capacity or jobs at its plants in Sweden and Belgium.

Stefan Jacoby, Volvo’s chief executive, said that the brand aimed to sell about 200,000 cars in China by 2015, and described the country as the company’s “second home market”.

He said that the first model to be built at the Chengdu plant would be a new car not in Volvo’s current line-up.

Li Shufu, chairman of Volvo and automotive holding group Zhejiang Geely, which last year bought the brand from Ford Motor for $1.5bn, said: “We have developed a solid plan for future growth in the strategically important Chinese market.”

Volvo said it would expand its dealerships in China from 106 to 220 by 2015.

It sold about 30,000 cars in China last year, some half of which were built elsewhere and faced steep import duties. As such, it is a small player in China’s booming car market.

Volvo said it planned to invest $11bn in new products and facilities worldwide over five years.

Mr Jacoby, a former head of Volkswagen in America, said last year that Volvo aimed to double its sales to 800,000 by the end of the decade. Volvo’s announcement of a China strategy followed heated discussions about how quickly and where to expand.

When Geely bought Volvo – the biggest overseas carmaker yet to be acquired by a Chinese owner – it promised the carmaker’s workforce that it would preserve its quality, managerial independence and large operations in Europe’s high-cost, low-growth car market. The Chinese company argued that growth in China would allow it to preserve jobs in areas like research and development in Europe.

Freeman Shen, who will head Volvo’s Shanghai-based China operation, said on Friday that its Chinese plants would “ensure that Volvo’s global manufacturing and quality system can be thoroughly implemented”.