Expansion plans for Volvo production in China

Chinese carmaker Geely, which is poised to acquire Swedish auto brand Volvo from US giant Ford, plans to expand the production of Volvo cars in China, according to media reports.

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.

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.

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Sweden’s Volvo regains strength after pandemic puts brakes on earnings

Swedish truck maker Volvo Group was hit by a sharp drop in earnings due to the coronavirus pandemic, but business rebounded at the end of the year.

Sweden's Volvo regains strength after pandemic puts brakes on earnings
Volvo Group CEO Martin Lundstedt. Photo: Adam Ihse/TT

In 2020, the group saw “dramatic fluctuations in demand” due to the Covid-19 pandemic, chief executive Martin Lundstedt said in a statement.

For 2021, Volvo raised its sales forecasts in its trucks division – its core business – in Europe, North America and Brazil.

However, it said it also expected “production disturbances and increased costs” due to a “strained” supply chain, noting a global shortage of semiconductors across industries.

The truck making sector is particularly sensitive to the global economic situation and is usually hard hit during crises.

In March, as the pandemic took hold around the world, Volvo suspended operations at most of its sites in 18 countries and halted production at Renault Trucks, which it owns, in Belgium and France.

Operations gradually resumed mid-year, but not enough to compensate for the drop in earnings.

With annual sales down 22 percent to 338 billion kronor (33.4 billion euros, $40 billion), the group posted a 46 percent plunge in net profit to 19.3 billion kronor (1.9 billion euros).

Operating margin fell from 11.5 to 8.1 percent.

However, the group did manage to cut costs by 20 percent.

“We have significantly improved our volume and cost flexibility, which were crucial factors behind our earnings resilience in 2020,” the group said.

Volvo's business regained strength in the second half of the year.

“Customer usage of trucks and machines increased when the Covid-19 restrictions were eased during the summer and this development continued during both the third and fourth quarters,” it said.

“Both the transport activity and the construction business are back at levels on par with the prior year in most markets.”

For the fourth quarter alone, the company reported a 38-percent rise in net profit from a year earlier.