Geely chairman Li Shufu has announced plans to increase Volvo production in China through a joint enterprise.
Volvo Car Corp and Zhejiang Geely Holding Group Co are hoping to win government approval for a joint venture to build vehicles in China. At a press conference in Hainan, Li Shufu, now chairman of both companies Geely acquired Volvo in 2010, announced his plans to increase sales of the Swedish car brand in China by stepping up local production. Volvo sold 40,873 locally produced and imported vehicles in China last year, up 35% from a year earlier.
The Volvo Concept You luxury sedan concept car Image: Volvo UK |
Despite Volvo being Chinese-owned, it is still regarded as a foreign company, meaning it will face the same challenges and restrictions as other foreign automakers, primarily that of gaining government approval. The announcement comes shortly after the National Development and Reform Commission (NDRC) proposed cutting beneficial policies to foreign investors, such as reduced tariffs on imported plant equipment and preferential license applications, as it looks to curb excess production in the booming market.
Industry commentator Yang Jian speculates Volvo's foreign status may in fact impede sales. As Li failed to convince the government to include Volvo in it's vehicle procurement program, applying for the joint venture licenses may become a costly and time consuming process. Furthermore, if Volvo, which is viewed as a luxury brand, becomes domestically mass-produced by Geely, it could risk tarnishing its luxury image and losing one of its main selling points.