• Sweden's news in English

Geely sets Volvo sights on Chinese luxury market

AFP/The Local · 31 Mar 2010, 08:10

Published: 31 Mar 2010 08:10 GMT+02:00

Facebook Twitter Google+ reddit

Zhejiang Geely Holding has agreed to pay $1.8 billion dollars for Volvo from Ford Motor Co in the biggest overseas acquisition by a Chinese carmaker, propelling Geely into a market dominated by Audi, Mercedes-Benz and BMW.

"I think if they do things properly and maintain the Volvo image in China and don't mix it with the Geely brand, I think they have got a very big chance to be successful here," said John Zeng, an analyst at IHS Global Insight.

Geely will spend $2.7 billion on the takeover - the original price tag plus $900 million in working capital - to turn around the loss-making Swedish carmaker recognised for sturdy family-friendly vehicles.

Better known for making cheap small cars, Geely has been at pains to reassure drivers around the world that the two brands will remain separate.

Geely plans to keep Volvo manufacturing plants in Sweden and Belgium and is considering opening factories in China, the world's biggest auto market.

"Volvo will retain its own distinctive features and will... continue to develop in the top luxury car sector," Geely chairman Li Shufu said Tuesday after flying back from Sweden, where the deal was signed at the weekend.

"Relations between Geely and Volvo in the future will be like brothers, not father and son. They will respect and support each other and grow together."

The deal, which US auto giant Ford initially agreed to in December, includes agreements on intellectual property rights as well as supply and research and development arrangements between Volvo, Geely and Ford.

Volvo will give Geely the "perfect platform" to improve its own product line and enhance its image in China, where it has struggled to make an impact, said Jerry Huang, a Shanghai-based analyst with research firm CSM Worldwide.

Geely has become one of China's largest private carmakers since launching its auto manufacturing business in 1997. It has an annual production capacity of 300,000 cars, but has sold less than 200,000 units abroad since 1997.

"There is quite a big gap between Geely's product line and brand awareness and those of Volvo's," said Huang.

"Geely gets a platform to learn and gain experience in the industry."

Geely vice-president Zhao Fuquan likened the relationship between Volvo and the Chinese carmaker to that of teacher and student.

"Volvo as a top brand in the world has accumulated enormous technology know-how," Zhao said at Tuesday's press conference in Beijing with Li.

"It is a strong resource for Geely and we will learn actively as a student to improve ourselves."

Geely is expected to use Volvo to tap the lucrative government procurement market for cars, estimated to be worth 100 billion yuan ($14.7 billion) this year, analysts said.

Beijing requires Chinese brands account for no less than 50 percent of government vehicles.

Story continues below…

"(Volvo) may even overtake Audi and other foreign luxury brands to become the new-generation official car," independent auto analyst Jia Xinguang said in comments posted on popular Chinese Internet portal sohu.com.

If more bureaucrats are seen driving Volvos instead of Audi sedans, it could enhance the image of the Swedish brand among China's increasingly wealthy middle class, Zeng said.

Audi sold a record 157,188 units in China in 2009, up 33.1 percent from the previous year, according to government data, while Volvo says it sold a mere 22,405.

"You can see the Volvo S80 becoming a strong competitor for the Audi A6 in terms of government procurement," Zeng said.

"The luxury market is growing very fast. China is the largest market for Audi, and Mercedes-Benz and BMW also record very fast growth in China."

AFP/The Local (news@thelocal.se)

Facebook Twitter Google+ reddit

Your comments about this article

09:30 March 31, 2010 by Nemesis
If Geely can crack the CHinese luxury car market, which is growing at a very fast rate at present, Volvo will be secured for a long time.

This is a good move on the part of Geely and will help to ensure innovation in volvo. Innovation will help maintain the company and jobs.
11:30 March 31, 2010 by cbeynch
Don't get fooled by the Chinese who have other things in mind. This is a trick to lull the Swedes into submission. Just look at what has happened in the US, where the Chinese have a strangle old on the US economy. The same thing will happen in Sweden where China pretty soon will be walking all over her. Luxury this!
12:16 March 31, 2010 by linuxcity
The only way to keep the brand in the luxury market is to keep the company Swedish, so I believe in this deal. Also because you don't have any other choices.
12:30 March 31, 2010 by pisaier
That's exactly what I said. S80 and S80L is the only thing Volvo can market in China. The Swedes can hardly imagine how many Audi A6 parking and running around there. Now they have the relationship business.

Don't think Volvo can beat Audi, but if Geely market S80 correctly they could have the same share.
15:12 March 31, 2010 by Ghostrider
A great move for Geely and China. A bizarre move by Ford and Sweden. The did get to sell some cell phones.
18:40 March 31, 2010 by spy
What about the poor dogs?
19:39 March 31, 2010 by linuxcity
I think Korean consumes more dogs than China.
19:59 March 31, 2010 by spy
Well that's not much solace for a Chinese dog is it?
21:51 March 31, 2010 by marionettes.show
Great move for Volvo and Geely.

BTW, I see another hypocrite here.
23:55 March 31, 2010 by alingsaskev
Watch Volvo move very swiftly abroad.

One of the reasons that Swedish products are becoming increasingly uncompetitive are Sweden's labour laws and the cost (in tax and contributions) of the Swedish workforce.

Whilst these amazingly robust regulations ensure the Swedish workforce in general are well cared for and allow for extended mommy and daddy leaves, keep the whole Scandinavian Socialist System ticking over nicely and work exceedingly well for Swedish companies, operating in Sweden, with a Swedish ethic, they are of no interest to venture capitalists and the burden will be seen as unnecessary and irksome to the Chinese-who, will pull production to somewhere more accommodating and geographically closer.
16:08 April 1, 2010 by linuxcity
19:59 March 31, 2010 by spy

Well that's not much solace for a Chinese dog is it?

Maybe you can spend some time on preventing the dog consumption in China then? At least I did. Most of Chinese are against eating them but since there is no laws for that makes everything difficult.

And I can't see how those things are related.
22:25 April 4, 2010 by spy

Dog eating is not the only example of savage behaviour, what about the following?

- China's treatment of Tibet

- Lack of freedom speech and media reporting or censorship of the internet

- Supression of religious beliefs

- Torture of prisoners and no judicial independence to ensure fair trials

- Death penalty (and the fact that people can be put to death for nonviolent crimes such as theft)
23:28 April 4, 2010 by kunkun

....theft? what kind of media tell you this?

if theft leads to death penalty. can you tell me what kind of crime do not be treat with death penalty? but i wish this is true, so there may be no theft in china, that is a good thing.

you post make me laugh, thanks.
20:45 April 6, 2010 by spy
Amnesty International....
Today's headlines
Refugee crisis
Asylum requests in Sweden down by 70 percent
Sweden's migration minister Morgan Johansson. Photo: Christine Olsson/TT

Sweden received 70 percent fewer requests for asylum in the period between January and September 2016 than it did during the same time last year, the country’s justice and migration minister Morgan Johansson has revealed.

The unique story of Stockholm's floating libraries
The Stockholm archipelago book boat. Photo: Roger Hill.

Writer Roger Hill details his journeys on the boats that carry books over Stockholm's waterways and to its most remote places.

Refugee crisis
Second Stockholm asylum centre fire in a week
The new incident follows a similar fire in Fagersjö last week (pictured). Photo: Johan Nilsson/TT

Police suspect arson in the blaze, as well as a similar incident which occurred last Sunday.

More misery for Ericsson as losses pile up
Ericsson interim CEO Jan Frykhammar presenting its third quarter results. Photo: Claudio Bresciani/TT

The bad news just keeps coming from the Swedish telecoms giant.

Facebook 'sorry' for removing Swedish cancer video
A computer displaying Facebook's landing page. Photo: Christine Olsson/TT

The social media giant had censored a video explaining how women should check for suspicious lumps in their breasts.

Watch this amazing footage of Sweden’s landscapes
A still from the aerial footage of Sweden. Photo: Nate Summer-Cook

The spectacular drone footage captures both Sweden's south and the opposite extreme, thousands of kilometres north.

Sweden could be allowed to keep border controls: EU
Police ID checks at Hyllie station in southern Sweden. Photo: Stig-Åke Jönsson/TT

Sweden could be allowed to keep ID controls on its border with Denmark beyond the current end date of November, following discussions among EU leaders in Brussels last night.

Why women in Sweden will work for free by November
File photo of a woman working in a Swedish office. Photo: Anders Willund/TT

A new study into the gender pay gap suggests Sweden still has some work to do.

Look familiar? Meet your jawbone's ancestor
Thank God for evolution, eh?

There's something fishy about the human jawbone – it has its origins in the placodermi, a jowly species of fish that lived 400 million years ago, Swedish and Chinese researchers say.

Isis claims unremarked arson attack in Malmö
The arson attack took place on Norra Grängesbergsgatan in Malmö. File photo: Emil Langvad/TT

An arson attack in Malmö that caused only minor damage and was barely reported in the media has been claimed by terror group Isis.

Sponsored Article
This is Malmö: Football capital of Sweden
Fury at plans that 'threaten the IB's survival' in Sweden
Sponsored Article
Where is the Swedish music industry heading?
Here's where it could snow in central Sweden this weekend
Analysis & Opinion
Are we just going to let half the country die?
Blog updates

6 October

10 useful hjälpverb (The Swedish Teacher) »

"Hej! I think the so-called “hjalpverb” (auxiliary verbs in English) are a good way to get…" READ »


8 July

Editor’s blog, July 8th (The Local Sweden) »

"Hej readers, It has, as always, been a bizarre, serious and hilarious week in Sweden. You…" READ »

Sponsored Article
7 reasons you should join Sweden's 'a-kassa'
Angry elk chases Swede up a lamp post
Sponsored Article
Why you should 'grab a chair' on Stockholm's tech scene
The Local Voices
'Alienation in Sweden feels better: I find myself a stranger among scores of aliens'
People-watching: October 20th
The Local Voices
A layover at Qatar airport brought this Swedish-Kenyan couple together - now they're heading for marriage
Sponsored Article
Stockholm: creating solutions to global challenges
Swede punches clown that scared his grandmother
Sponsored Article
Swedish for programmers: 'It changed my life'
Fans throw flares and enter pitch in Swedish football riot
Could Swedish blood test solve 'Making a Murderer'?
Sponsored Article
Top 7 tips to help you learn Swedish
Property of the week: Linnéstaden, Gothenburg
Sponsored Article
How to vote absentee from abroad in the US elections
Swedish school to build gender neutral changing room
People-watching: October 14th-16th
Sponsored Article
'There was no future for me in Turkey'
Man in Sweden assaulted by clowns with broken bottle
Sponsored Article
‘Extremism can't be defeated on the battlefield alone’
Nobel Prize 2016: Literature
Sponsored Article
Stockholm: creating solutions to global challenges
Watch the man who discovered Bob Dylan react to his Nobel Prize win
Sponsored Article
Why you should 'grab a chair' on Stockholm's tech scene
Record numbers emigrating from Sweden
Sponsored Article
'There was no future for me in Turkey'
People-watching: October 12th
Sponsored Article
Where is the Swedish music industry heading?
The Local Voices
'Swedish startups should embrace newcomers' talents - there's nothing to fear'
Sponsored Article
Last chance to vote absentee in the US elections
How far right are the Sweden Democrats?
Property of the week: Triangeln, Malmö
Sweden unveils Europe's first elk hut
People-watching: October 7th-9th
The Local Voices
Syria's White Helmets: The Nobel Peace Prize would have meant a lot, but pulling a child from rubble is the greatest reward
Missing rune stone turns up in Sweden
Nobel Prize 2016: Chemistry
jobs available