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Volvo and Geely clash on China expansion

Volvo Cars and its Chinese owner Geely appear headed on a collision course regarding Volvo's expansion in China, the Financial Times reported late on Thursday.

Volvo and Geely clash on China expansion

Geely, which acquired the Swedish car maker from US giant Ford in August, said in September it planned to increase Volvo sales to 300,000 cars a year in China alone.

Company chairman Li Shufu said he wanted three new Volvo plants in China to produce that volume. However, Volvo’s management wants to hold off on expansion for now, the Financial Times said Friday.

Members of Volvo’s Gothenburg-based management “will not decide about investing if they don’t have a business case with black figures and good margin,” a person familiar with the discussions the British newspaper.

The person described the discussions as “heated, not acrimonious.”

Volvo spokesman Per-Åke Fröberg told AFP on Friday that Volvo and Geely were in talks over expansion in China and that management would take a decision on “the first step of localised production in China…within a couple of months.”

“It’s a natural thing that there are discussions about such an important matter as the Volvo car strategy for China,” he said.

When Geely and Ford closed Volvo’s purchase in August, Li said Volvo would “remain true to its core values of safety, quality, environmental care and modern Scandinavian design.”

He added the brand would strengthen the existing European and North American markets and expand its presence in China and other emerging markets.

Li “has a very strong belief in the future of Volvo in China and has a vision of up to three factories over a long period,” Fröberg said.

“That doesn’t mean that he thinks decisions should not be based upon a firm and sustainable business plan,” he said.

Volvo already builds its S40 and S80 models in China, through a partnership between former owner Ford and Chinese rival Chang’an. The brand is set to sell around 30,000 Volvos in China this year, half of which are imported.

Chinese state media said in October that China, the world’s largest auto market, thad become the third-largest market for Volvo.

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VOLVO

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.

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