With new China plant, Volvo hopes to hit 2020 sales goal early

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Chinese-owned Swedish automaker Volvo Car Corp expects to be selling 200,000 cars a year in China by 2018, a senior executive said, two years ahead of its latest target and as a new assembly plant gears up for full production later this year.

The sales target is part of Volvo’s plans announced two years ago following its acquisition by Zhejiang Geely Holding Group Co GEELY.UL – plans that see China’s growing appetite for premium cars helping more than double Volvo’s annual global sales to 800,000 cars by 2020 from 373,000 sold in 2010.

While China’s premium sector – generally considered as cars costing more than $50,000 – has grown faster than the industry average in recent years, the government is keen to stamp out over-the-top luxury, and many drivers are cautious not to look too flashy – which could play to Volvo’s strengths in quality and solidity.

Fu Qiang, who took over Volvo’s China sales and marketing operations last year, said on Tuesday the country’s premium autos market should more than double to 3 million cars by 2020.

Fu said Volvo expects its China sales to grow by a fifth this year.

“We have a lot of opportunities in China,” he said at a company presentation in the southwestern city of Chengdu, where Volvo is due to open a new assembly plant. Though Volvo lags as a premium brand behind German brands, “nothing is impossible here (and) China changes too fast.”

A new plant in Chengdu is “more or less completed,” said Volvo spokesman Per-Ake Froberg, and is producing a limited number of cars to test the facility’s manufacturing processes and the quality of the cars it plans to make there. Full production should begin in the fourth quarter, he added. The plant will be able to produce 125,000 cars a year.

A second assembly plant is being built in the northeastern city of Daqing, with production not expected to start until the end of 2014, Froberg said.

With the Chengdu plant up and running, the executive predicted Volvo could hit its 200,000 cars a year goal in five years.

“If we stick with the strategy and implement the plans as envisioned, I am positive we’ll reach the goal five years from the start of full localization of production,” he said.

In an emailed response to questions about the executive’s prediction that Volvo would likely hit its China sales target ahead of schedule, Froberg said:

“Our sales goal for China is 200,000 cars by around 2020. If that happens in 2018 or 2022 is of less importance.” Starting production in Chengdu this year would be “instrumental” in getting Volvo to its sales goal, he added.

Source: reuters.com

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