The Volvo S60 is now imported to China. The carmaker did not disclose what models will be locally produced at its new facility. [Photo / China Daily]

A year after Geely's big buy, carmaker announces plans for China production

BEIJING - Volvo Cars Corp, the Swedish automaker acquired by Zhejiang Geely Holding Group Co last year, announced on Feb 25 that it will build its first Chinese plant in the western city of Chengdu and aims to sell 200,000 cars in 2015.

"China is the key to the successful future of Volvo", said Volvo CEO Stefan Jacoby at a news conference in Beijing, when the company released its China business strategy.

Volvo's blueprint envisions a 20 percent market share in China's luxury car segment in 2015 as the company increases its sales six-fold from just 30,000 cars in 2010.

To support the ambitious goal, Volvo has been preparing for local production in China.

Jacoby announced Volvo will construct its first plant in Chengdu and is discussing plans to build factory in the northeastern city of Daqing.

Previous media reports said Volvo will lay the cornerstone of its Chengdu plant in March and begin production two years later with an annual capacity of 100,000 cars.

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Freeman Shen, senior vice-president of Volvo Cars and chairman of Volvo's China operations, said the Chengdu production site will include assembly, engine and transmission plants.

Chengdu will also be home to Volvo's new centers for research, parts procurement and sales in western China, according to Shen.

He didn't disclose what models the new plant will produce, only saying "anything that Chinese customers will like - we will try to make them here".

Volvo makes its S40 and S80L models in China at a joint venture between Ford Motor Co and Chongqing Chang'an Automobile Co under two contracts that will expire in 2015 and 2018.

Li Shufu, chairman of Zhejiang Geely and also chairman of Volvo, said the company will honor the contracts despite its new production facility in Chengdu.

Volvo established its China headquarters in Shanghai a month ago. The company said it will also build an R&D center in the city that will focus on the design and development of premium cars as well as electric and new-energy vehicles.

Volvo also plans to greatly expand its dealer network in China to 220 outlets, up from 106 at present, it said at the news briefing.

China's luxury car market is now dominated by Audi, BMW and Mercedes-Benz, all of which have local production facilities with Chinese partners. Combined sales of the three German manufacturers were about 540,000 units last year, comprising 80 percent of the premium market.

"The biggest difference between us and our competitors is that we don't have the limitation of (setting up) joint ventures - we are one enterprise and have one united goal in China," Shen said.

According to market research firm JD Power and Associates, the size of China's luxury car market will more than double to 1.5 million units by 2015, up from 680,000 last year.