Volvo factory to compete with China rivals
Geely-held Swedish carmaker to avoid 25pc import tariff as it begins production this month
Three years after buying Volvo Cars, mainland tycoon Li Shufu may get to compete with BMW and Volkswagen's Audi on a more level playing field in his own country.
Volvo Cars, a unit of Li's Zhejiang Geely, will begin production this month at its first factory in China, allowing it to avoid the mainland's 25 per cent import tariff. The company has so far brought in its cars from overseas or produced them in limited quantities at a Ford Motor plant in Chongqing.
The three years it took to open the factory shows how Li miscalculated the edge he would have in his home country as the mainland government subjected the Swedish brand to the same regulatory approval procedures as all foreign carmakers.
Still, the plant paves the way for Volvo to double sales to 800,000 by the end of the decade as mainland China heads towards becoming the world's largest market for premium vehicles.
"If they fail in China, I don't really see where they can gain volume significantly," said Lin Huaibin, a Shanghai-based analyst at IHS Automotive. "If they can do China right, they will gain strong momentum."
Volvo posted a loss last year as global sales fell 6.1 per cent to 421,951 units, with the biggest decline in Sweden. In China, sales dropped 11 per cent, while deliveries at Audi and BMW climbed 40 per cent and 30 per cent, respectively.
