Volvo Planning Factory in Western China’s Chengdu

Chinese officials say Volvo Car Corp. plans a manufacturing base in the western Chinese city of Chengdu as it aims for expansion in the world’s biggest auto market following its buyout by independent automaker Geely.

An official with the city’s Automotive Industry Investment Bureau confirmed a report Tuesday that the Swedish carmaker has chosen Chengdu as a manufacturing base, but would not give further details.

The Volvo factory reportedly will be focused on making compact and economy cars on a large scale. Shanghai and the northern city of Daqing also had been vying for new Volvo factories following the acquisition last year by Geely.

Volvo plans a news conference to announce its strategy in China later this week in Beijing, the Chengdu Overseas Media Service, a local, nongovernmental media group, reported, citing officials from the city’s trade development zone.

Ning Shuyong, a Geely spokesman, would not confirm the report but said a decision was pending.

Chengdu, capital of populous Sichuan province, is among many Chinese cities aspiring to become major automobile manufacturing hubs and is one of the country’s biggest inland markets. While overall sales of autos are forecast to slow slightly from their torrid growth in recent years, sales in the provinces are surging as increasingly affluent families buy their first cars or trade up.

Chinese media reports say the factory in Chengdu is already under construction and is due to begin production by 2013, with an initial capacity of 125,000.

Privately-owned Geely Holding Group agreed in March 2010 to buy Volvo Car from Ford Motor Co. for $1.8 billion, the biggest acquisition by a major Chinese automaker so far.

The buyout gave small but ambitious Geely access to a prestigious brand and top-tier technology and enabled Ford to unload the loss-making automaker to raise cash and focus on its core Ford and Lincoln brands.

Industry analysts have expressed doubts over 13-year-old Geely’s ability to make a success of Volvo, an older, perennially money-losing manufacturer on another continent. Geely, based in the eastern city of Hangzhou, has built a business selling cars, motorcycles and scooters with little government support.

Volvo recently set up a new China headquarters in Shanghai.

Geely has said it plans to keep its production arrangements in Europe and contracts for assembling 15,000 cars a year by a Ford joint venture, Changan Ford Mazda Automobile Co., in Chongqing. The longest of those contracts runs until 2018.

The Swedish automaker sold 22,400 vehicles in China in 2009, up 80 percent from the year before, but has trailed behind rivals like BMW and Audi.


Leave a Reply

Your email address will not be published. Required fields are marked *