A Chinese construction worker in a Volvo AB front-end loader digs in preparation for the construction of a highway near Khunjerab, Pakistan. Volvo's investments in China will expand its production and technology centers in the country. [Photo / Bloomberg]

Construction equipment firm hopes to tap into emerging Asian economies

SHANGHAI - Swedish construction equipment provider Volvo Group is planning to invest more than $100 million in the expansion of products for emerging markets, most of it going to China, said the company's chief executive.

"Volvo is committed to supporting our capacity and product offering in China and throughout Asia," said Olof Persson, president and chief executive of Volvo Construction Equipment, on Tuesday.

"We will achieve this by a comprehensive program of investments in our Asian industrial operations, a strengthening of our dealer network, and an expansion of our products that are more closely tailored to the specific needs of customers in this region," said Persson at Bauma China, the biennial Asian construction equipment exhibition held in Shanghai.

The company will set up a $30 million Volvo Technology Center in Jinan, Shandong province, and invest $50 million into expanding its joint venture production facilities in Linyi, Shandong province, by the end of 2012.

The spending comes on top of the $30 million in investment made in the Volvo excavator facility in Shanghai since 2003.

"Our business in Asia has doubled this year alone, with China as the pillar contributor," said Persson.

The company's excavator business has increased by 135 percent this year.

Property measures inspection launched Related readings:  We'll make Volvo regain its past glory, says Volvo Chinese chairman  China becomes Volvo's 3rd largest market  Volvo may build plant in Chengdu  Volvo to hire Chinese designers to enhance local appeal

"We must recognize the needs of emerging markets led by China, which requires premium global products offering increased performance and productivity. There is a large proportion of customers who require reliable competitive equipment," he said.

The Chinese government announced an investment of 4 trillion yuan ($602 billion) to stimulate the domestic economy in late 2008, with 83 percent of the package going to infrastructure construction.

Booming demand led to a boost in the production of construction equipment in China to more than 234,000 units in 2010, accounting for more than half of the world's total.

Statistics show that public infrastructure spending in China will grow by nearly 160 percent in the next five years, from the current 2.6 trillion yuan a year to 6.7 trillion yuan in 2015.

Persson told China Daily that Volvo Group will continue to support the local premium customer segment with its established Volvo brand.

The company's Shandong Lingong brand, a joint venture in which Volvo holds a 70 percent stake, will serve the larger mass market.

"Volvo is well positioned in China to capitalize on the huge market opportunity and growth potential," said Persson.

"Our dual brand approach offers a unique advantage to meet the needs of a much wider customer base. We will support this approach with products dedicated to this market, using local Chinese knowledge and leveraging an expanded Asian manufacturing footprint," he said.