Volvo aims to spend $11b on expansion
Published on February 27, 2011 by Tycho de Feijter
Volvo Car Corp, the Swedish automaker acquired by Zhejiang Geely Holding Group Co, plans to invest as much as $11 billion worldwide over the next five years to tap rising demand in markets including China.
The company is also working to win government orders and is considering manufacturing cars in China for export, Chief Executive Officer Stefan Jacoby said on Friday in an interview in Beijing.
“It is obvious that at some point manufacturers will export from China,” Jacoby said. “We, as a global premium brand with a European heritage, have a very good opportunity because we are owned by a Chinese enterprise and we plan to utilize our manufacturing capacities here.”Premium marques including Volvo, Audi AG and Daimler AG are expanding in China, the world’s biggest automobile market and second-largest economy, as rising incomes and economic growth boost spending. The Swedish brand, whose chief executive presented its China strategy on Friday alongside Geely Chairman Li Shufu, is counting on rising demand in to help double sales to 800,000 vehicles in 10 years.
Shares in Geely Automobile Holdings Ltd have lost 2.9 percent in 2011.
“There is no doubt about the great importance of the Chinese market to Volvo,” said Yu Bing, an analyst with Pingan Securities Co in Shenzhen. “The vital question is whether Volvo will be able to avoid any discounts in its brand’s premium value because of the takeover by a Chinese carmaker.”
Volvo, which Ford Motor Co sold to Zhejiang Geely in August for $1.5 billion, aims to sell 200,000 cars in China by 2015, from 30,522 in 2010, Jacoby said. Volvo also plans to increase its dealer numbers in China to more than 220 by 2015 from the current 106, according to the company.
The carmaker is working to increase sales to the central and local governments in China, Jacoby said. “Being owned by a Chinese enterprise offers us additional opportunities for getting into the government fleet business,” he said.
Volvo will invest in a new plant in the city of Chengdu, in southwestern China, and is considering setting up a plant in Daqing in the northeastern area of the country, the company said. Shanghai will serve as Volvo’s China headquarters and the main center for product-development, design and sourcing.
Geely was the eighth-biggest automaker in China last year.
Volvo’s main rivals boosted their sales in China last year. Volkswagen AG’s Audi sold 227,938 cars in the country, up 43 percent from 2009. Daimler AG’s Mercedes-Benz more than doubled its sales to 148,400, while Bayerische Motoren Werke AG sold 168,998 units, an 87 percent gain.