With new China plant, Volvo hopes to hit 2020 sales goal early: executive

Mon Jun 3, 2013 5:03pm EDT
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By Norihiko Shirouzu

CHENGDU, China (Reuters) - Chinese-owned Swedish automaker Volvo Car Corp expects to be selling 200,000 cars a year in China by 2018, a senior executive said, two years ahead of its latest target and as a new assembly plant gears up for full production later this year.

The sales target is part of Volvo's plans announced two years ago following its acquisition by Zhejiang Geely Holding Group Co GEELY.UL - plans that see China's growing appetite for premium cars helping more than double Volvo's annual global sales to 800,000 cars by 2020 from 373,000 sold in 2010.

Volvo competes in China, its second-biggest market after the United States, against global luxury brands BMW (BMWG.DE: Quote), Jaguar (TAMO.NS: Quote) and Volkswagen AG's (VOWG_p.DE: Quote) Audi. Daimler has said it expects the premium auto market to grow at a "high single-digit or low double-digit rate" this year in China, where total vehicle sales rose 13.4 percent in April from last year, up from 10.7 percent growth in March.

While China's premium sector has grown faster than the industry average in recent years, the government is keen to stamp out over-the-top luxury, and many drivers are cautious not to look too flashy - which could play to Volvo's strengths in quality and solidity.

Volvo originally said demand in China, the world's biggest auto market, would account for nearly half the additional volume it plans to generate around the world, but momentum fizzled last year as Volvo was forced to clean up management discipline at its independent dealer-operators.

While Volvo has failed to boost its China sales as much as it had hoped since 2011, the executive - who spoke to Reuters on condition he wasn't named as the sales projection is an internal target - said the renewed confidence was due to expectations for local car production and to changes in how it manages its network of retail showrooms. Those changes, he said, have resulted in "lots of good returns, and sales are now growing as planned."

A new Volvo plant in the southwestern city of Chengdu is "more or less completed," said Volvo spokesman Per-Ake Froberg, and is producing a limited number of cars to test the facility's manufacturing processes and the quality of the cars it plans to make there. Full production should begin in the fourth quarter, he added. The plant will be able to produce 125,000 cars a year.

A second assembly plant is being built in the northeastern city of Daqing, with production not expected to start until the end of 2014, Froberg said.   Continued...