Localization accelerates Volvo’s entry into the first camp of luxury vehicles

Just a year ago, Li Shufu and Stephen Jacobs, Volvo’s global president and chief executive officer, unveiled Volvo’s development strategy for the next five years in China. By 2015, sales volume will reach 200,000 units and it will occupy the luxury car market in China. 20 % of shares. Obviously, this is a very challenging goal, but it is also possible to see Li Shufu’s confidence in Volvo and the future.

This goal is achieved on the premise that it is based on Volvo's production in China.

Recently, it was reported that the localization project has entered the final approval stage. The total investment of RMB 4.2 billion (including RMB 1 billion of parts and components for Chengdu plant) will be the first to be broken down by the Volvo Chengdu plant. It is understood that Li Shufu once hoped to build factories in Chengdu, Daqing, and Shanghai at the same time. Eventually, Li Shufu and Volvo were subject to a variety of factors to choose this compromised solution. That is, the Chengdu factory will be the first, followed by Daqing, Shanghai will be the first China's regional headquarters and R&D center do not involve production for the time being.

As the first year of the five-year strategic plan, Volvo sold 47,200 vehicles in China in 2011, a substantial increase of 55% year-on-year, and it was achieved with full import. According to Volvo, the Chinese market is "the fastest growing market within Volvo Car Corporation and the third largest market in the world." Although the current development trend is good, the growth potential of the entire luxury car market is still relatively large. However, if the approval of Volvo domestic projects is not approved as soon as possible, not only will the completion of the five-year strategic plan for development be challenged, but it will also be used by Audi and BMW. Mercedes-Benz these three brands further widen the gap.

The reason why Volvo’s domestic project approvals have been progressing so slowly is because the mutual game between Chengdu, Daqing and Shanghai’s local governments affected the speed of Li Shufu’s and Volvo's decision making, leading to a more advanced discussion on how to balance investment in these three places. And research. In the latter stage, the central government was mainly constrained by the central government’s tightening of the approval and issuance policies for production qualifications due to concerns over the overcapacity of domestic vehicles and increasing industrial concentration, and strict control over the newly-built production capacity, resulting in Volvo’s need to carry out shells first. The acquisition of resources can only be used for the construction of domestically-produced projects. Once again, this has delayed a lot of time. However, one of the key points is controversy over Volvo's "identity" determination.

From the current perspective, the government did not relent on the determination that Volvo was a foreign brand. In this way, according to relevant policies, Volvo could only use China in a joint venture or OEM mode. Judging from the disclosed information, Geely has indeed tried to accelerate the approval of its localization projects in a two-pronged approach.

Combined with Volvo's current operating indicators, it can be seen that Geely's acquisition of Volvo is successful. 100% equity acquisition makes Volvo a wholly-owned subsidiary of Geely. This is neither the improvement of Geely's own branding nor the improvement of research and development technology. No benefit. The relationship between the two also determines that the expansion of Volvo will have a positive impact on Geely. Therefore, although Volvo’s identity is difficult to determine for the time being, it is wholly owned by a Chinese company.

According to a survey conducted by a Geshi Automobile Research Institute for industry experts, more than 90% of the experts believe that the government should open green channels on Volvo's domestic projects from the perspective of vigorously supporting automakers with powerful independent innovation capabilities and independent intellectual property rights. However, Volvo’s domestically-produced projects have obviously not received “special care” from the Chinese government, and have not simplified the complicated approval process, compared with the policy conveniences that other joint venture companies can enjoy in setting up factories in different locations.

Li Shufu had been confident that Volvo would be involved in the government's bus procurement system. The debut of the S80 in some government high-level meetings in the past two years can also be seen to be effective. However, the unsatisfactory market sales performance of the S80 shows that the door to the government's bus procurement has not really opened to Volvo.

Expect to wait, success from the market often requires the maturity of various types of opportunities. Today, Volvo has finally made significant progress on the road to localization. The industry is also generally expected that its sales in the Chinese market will enter a real outbreak after two years, and eventually hopefully step into the first camp of luxury cars.