23 October 2016
Lars Danielson said Volvo plans to boost its capacity in China to 200,000 units over the medium term. Photo: EJ Insight
Lars Danielson said Volvo plans to boost its capacity in China to 200,000 units over the medium term. Photo: EJ Insight

Volvo eyes lower-tier cities to boost China sales

Swedish automobile maker Volvo seeks to boost its China sales by expanding its dealer network to lower-tier cities in the next few years.

“We are fully represented in the first- and second-tier cities in China. We will continue to grow in the third- and fourth-tier,” Lars Danielson, senior vice president of Volvo Car China, told EJ Insight in an interview. “By five years, we will cover all major Chinese cities.”

“Volvo’s medium-term target is to sell 800,000 globally, 200,000 of which will be contributed by China sales,” Danielson said. “In China, we aim to double our market share to support our global volume target.”

Last year Volvo recorded flat sales growth in China at 81,588 units, from in 81,574 in 2014, amid a slowing economy. It sold 503,127 cars globally last year, up 8 percent.

In the first half of this year, its sales in China grew 6.3 percent to 40,688 units. 

The growth was driven by growing demand for the new XC90 as well as XC60 and S60L sedan, which are produced at its Chengdu manufacturing base.

Meanwhile, its global sales grew 10.1 percent to 256,563 units with strong growth in the US and Sweden markets.

The company is the sixth largest luxury car maker in China by sales with 4.39 percent market share among the top 10 players, according to last year’s sales figures. The top three are all German brands – Audi (30.7 percent), BMW (24.95 percent) and Mercedes Benz (20.09 percent) –followed by Britain’s Jaguar (4.97 percent) and Japan’s Lexus (4.68 percent).

Between 2011 and 2015, Volvo went through phase one of its transformation by investing US$11 billion in new platforms, products and manufacturing facilities, Danielson said.

“Now we are in the second phase of the transformation journey and our focus is to achieve global volume growth, including our three main home markets – Sweden/Europe, USA and China,” he said.

“By 2020, we will upgrade our entire product line-up with our 90/60 cluster scalable product architecture (SPA) cars as well as 40 cluster cars based on compact modular architecture (CMA) platform.

We will offer plug-in hybrids across our entire product range, meaning at least two hybrid versions of every model in its range and we will have our first all-electric car in 2019,” he added.

Daqing manufacturing base

Since Volvo was acquired by Geely Automobile Holdings Ltd. (00175.HK) from Ford Motor for US$1.8 billion in 2010, it has remained a separate entity, targeting only the luxury market segment.

“Geely must be Geely while Volvo must be Volvo. We are two separate entities,” Danielson said, adding that the two companies are now collaborating in an engineering project in Sweden to develop a CMA platform for small cars.

The company’s new manufacturing base in Daqing in Heilongjiang province will start operation in November.

Its first mission is to mass produce the S90, a high-end series that will compete with the German brands. The factory will have a capacity of 50,000 units.

The company, which has its regional headquarters in Shanghai, previously announced a plan to boost the capacity of its Chengdu plant from 50,000 units to 150,000 units by 2020.

Since its opening in 2013, the plant has produced more than 140,000 cars.

Volvo’s engine factory in Zhangjiakou, where the 2022 Winter Olympics will take place, commenced operation in April this year with a planned capacity of 325,000 units.

“In China, localization is very important. If not, we will have to pay 25 percent import duty, which makes it very difficult for us to compete with rivals,” Danielson said.

“When we localize our products, we keep our quality standard with the same specifications. We need to be authentic as we are trustworthy and credible to our customers,” he said.

In some parts of the world, there may be some prejudice towards “Made in China” products, but the concerns disappear quickly as customers find nothing different from a Volvo made in China and one made in Europe, he said.

“Volvo is becoming a true global car manufacturer with plants in Sweden, Belgium, China and Malaysia while the company’s Charleston plant in the US will be operational in 2018,” he said. “Our principle is that ‘we build where we sell, and we source where we build’.”

[Chinese version中文版]

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Volvo S60 Polestar is now a flagship product. Spotlight will fall on a new model, S90, later this year. Photo: EJ Insight.

Chief reporter at EJ Insight

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