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Volvo targets luxury in China
Published on: 2010-08-19
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Volvo Car Corp’s new chief executive has said he planned to push the Swedish brand’s vehicles upmarket and make China its biggest market within five years.

While Germany’s luxury brands are reporting rising sales and deriving a large portion of their profits from China, Volvo sold just 22,000 cars last year in the world’s largest vehicle market and aims to sell about 30,000 there in 2010.

Volvo plans to bolster its position with the help of Geely, the Chinese carmaker whose parent company completed its purchase of Volvo from Ford Motor for $1.5bn earlier this month. “We are latecomers,” Stefan Jacoby, the carmaker’s chief executive, told the Financial Times. “In five years it [China] might be the strongest market globally.”

Volvo’s biggest market is the US, where the brand has failed to match the strong growth of its competitors, BMW, Mercedes-Benz and Audi, in part because it builds no cars there.

Volvo sold just under 335,000 vehicles worldwide last year, fewer than any of the German luxury brands and 11 per cent fewer than in 2008.

In China, Volvo makes its S40 executive compact car and a long-wheelbase version of its S80 saloon, at Ford and Mazda’s joint venture with Chang’an, based at Chongqing. It plans to continue building both models there for their current production generation.

China requires foreign carmakers that want to assemble vehicles in the country to form joint ventures with Chinese carmakers. Geely’s purchase, which had the support of the Chinese government, makes Volvo the industry’s first Chinese-owned luxury car brand. Geely plans to build at least two car plants and an engine plant to make Volvos in the country.

"Having a Chinese partner and shareholder like Geely offers a lot of opportunities to do things more pragmatically than maybe other companies are doing through joint ventures,” said Mr Jacoby, formerly Volkswagen’s head of US operations.

This month, Li Shufu, chairman of Geely and Volvo, told the Financial Times he wanted Volvo to build a large saloon like BMW’s 7 Series and the S-class of Mercedes-Benz, and make all the brand’s vehicles more luxurious.

Mr Jacoby said: “I totally agree we have to up-scale Volvo in the near future to have a solid position in the premium segment. We have to define a Scandinavian version of what luxury means.”

Mr Jacoby, who became Volvo’s chief this week, is devising a new strategy for the Swedish carmaker. “In half a year we will have a much clearer of idea where we will be,” he said.

He said Volvo did not have plans to build cars in North America. “The priority for us is China. That’s already a big stretch for us here as a relatively small manufacturer.”

 

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