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Expansion plans for Volvo production in China

TT/Christine Demsteader · 9 Jan 2010, 11:08

Published: 09 Jan 2010 11:08 GMT+01:00

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Reuters news agency reported on Friday that a source close to the company has revealed new and improved manufacturing plans in China.

Geely earlier stated its desire to work with local authorities and build production facilities which are tailor-made for the Chinese market.

Volvo began small-scale production in China in 2006 and today a number of Volvo models are being manufactured through Ford’s cooperation with Geely competitor Changan Automobile.

The cars include the S 40 model and a variant of the S 80 – which both sell at a substantially reduced price in China by avoiding high customs charges.

According to Reuters, Geely will acquire existing machinery from Changan. In the future it intends to collaborate with Chinese companies to build a new Volvo factory in Chongqing, in the south west of the country, where Changan’s own production plant is based.

Local production has led to steadily increasing sales for Volvo in China, but figures still remain relatively small.

Last year, around 15,000 cars were sold in the country compared with 12,600 cars in 2008.

Story continues below…

Despite ongoing discussions to expand production to China, Geely has previously stated that Volvo’s head office and factory in Gothenburg will not be closed.

TT/Christine Demsteader (news@thelocal.se)

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Your comments about this article

18:15 January 9, 2010 by volvoman9
Don't hold your breath on this one. It may take a little time but the Chinese own Volvo now and will do as they please with it. Ford's sales in China were up 44% for the year ending in '09. They have established an enviable market share but this does not come without a price. They had to placate the Asians and this is the result. Give us what we want Ford or we'll look elsewhere. They are short cutting technology development in the auto manufacturing world by buying it. Nothing new here; it worked for Japan and look at their industry now. You can't fight the Asian business model with nostalgia. They simply have too large a work force willing to work for s##t wages. I look for them to buy Ford, GM or perhaps Volkswagen someday. A Chinese Mercedes anyone. Don't hold your breath. The corporate world of the west is cashing in. They will have their money and we may be the new outsource labor target for Asia.
00:43 January 10, 2010 by Thebinary1
Well - I think that gloomy scenario won't play out. The Chinese have a habit of substandard quality in their manufacturing sector. Whether its a toy, a hair-dryer, a laptop, or a car - they seem to fall apart at a consistent rate when the label is "Made in China".

I am totally excited to see the following headlines in the near future:

"Volvo S40 sedan accelerates when brakes are applied!"


"Volvo S40 airbags failed to deploy in accident!"
02:18 January 10, 2010 by repat_xpat
Unfortunately, I fear the Chinese purchase of the SAAB 9-3 & the 9-5 as well as Volvo means that the Chinese are starting to address quality issues. I fear that its only a matter of time before all Volvo manufacturing is move to China.

The Chinese management style is much tougher than American management style. Moreover, Ford took a hands off approach with Volvo as compared to their work with Jag. I suspect the cultural clashed between Geely and Volvo leadership will make the issues between SAAB and GM look like a romance. Who knows how long the rest of Volvo will remain in Sweden after 20 years of such conflict. I hope the leadership a Volvo will respond better than the leadership at SAAB did. Volvo will survive, but its existence in Sweden will depend on how compliant its leadership is to their new owner.
14:52 January 10, 2010 by 2394040
I couldn't help laughing at one comment in the article: they sell at a substantially reduced price in China by avoiding high customs charges. That's strange. Someone obviously forgot about the slave-labor wages that Chinese production workers have to accept. The lesson of history is that people don't learn from history, and this is one good example.

So what's in the future? Most likely scenario is that more and more Volvo production will go to China. I would be very surprised if all production DOESN'T eventually go to China.

In the meantime, the "Americanization" of Sweden will continue unabated. A future of less health care, fewer social benefits, and a downward-spiraling standard of living.

I'm an American, and I can't help notice what has happened in the last 30 years here in the USA. I once heard in a lecture that "nations rise and fall because of the decisions of its leaders". Sweden's leadership is certainly failing at a bad time in the nation's history.

It ain't pretty, believe me.
15:53 January 10, 2010 by Thebinary1
Unfortunately you have forgotten about the dynamic factors:

- While it is true that China's cheap labour is the key driver of its manufacturing industry, it is not sustainable and WILL end. The average Chinaman's age is 34 years old and rising. The size of China's workforce is at its peak at the moment and will decline simply because of the government's population policies.


All this means that Chinese labour is only competitive in the short-term, and not the long-term. When you add quality (or lack of it) as another factor the numbers will be unfavourable. Volvo will discover this first hand.

Immigration is a non-issue because lets face it, which foreigner would willingly migrate to China and earn substandard wages along with rediculous hours and climb a career ladder that is already reserved for the elite.

- The other thing is raw materials! China does not have it, hence why they are very persuant in buying up foreign companies. One only needs to look at the Australian resource sector to understand what the Chinese game is about. Additionally, there is an every steady rise in cost. China's willingness or ability to recycle is not at all comparable to Western countries.

- The fina thing is the currency - the Chinese Yuan. They are pegged to the USD at the moment and China has 2 trillion dollars in reserve in that currency. The USD is anything but predictable at the moment and will remain unpredictable for the next 5 years or so. Any unfavourable movement in this part alone is enough to kill Volvo's China Adventure.
18:22 January 10, 2010 by bjinger
to #4

Chinese are realistic, the workers got what they expected to pay. Why the americans are highly payed to maintain the so called high living standards..., more and more people are saying no to that. It's not a good idea or shameless to borrow money to pretend "rich".
18:55 January 10, 2010 by porksteak
to #6

Realistic is accepting low pay and lousy working conditions over rural poverty. That is the choice the Chinese workers have.

The issues you mention that some Americans have with debt is another matter. It is more a product of the mathematical illiteracy and unrealistic expectations that some but certainly not all in this country have.

As others have pointed out, China has a very poor record on quality and safety. I'm watching these developments with some trepidation. It will be a very sad day indeed if I buy brake pads for my V70 and they are labled "made in China".
19:12 January 10, 2010 by zhqwang
It is very surprising. You protested the bid for selling volvo to China Geely, and you also protest the wind down for SAAB.

I am chinese. I'm glad that Geely buy Volvo. I will buy Volvo car if bid is made.

I think that Geely will produce Volvo in Sweden for noble man in EU and USA. But it will produce Volvo in china to fitable for chinese strain.

There are many poor records in the past, but it is reducing with the development of time.

Now there are many private companies in china with the opening and reforement of china.Fox example, Huawei,Wanxiang,zhengganjixie,ETC..they are all good private company. Huawei can enter into world 500 like Edission in Sweden.

I wish that you can buy Volvo car made in Sweden and support Volvo as in the past.Volvo are Sweden blood for ever. China can't change this, but it can produce good car having chinese blood with help of Volvo.
16:50 January 11, 2010 by kilou
Why not a VOLVO-SAAB brand 100% made in Sweden????? Have this at least been considered?
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