Exclusive: Geely, Volvo differ over future China look

Tue Sep 10, 2013 2:21am EDT
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By Norihiko Shirouzu

(Reuters) - Safe, solid and understated in a Swedish way, or a wannabe luxury brand pandering to a Chinese taste for excess and 'bling': that's the debate causing ripples at the top of Volvo Car Corp, under Chinese ownership since 2010.

A culture clash between Volvo's European management and Zhejiang Geely Holding Group Co GEELY.UL, the brand's owner, may have broader implications for corporate China. If Geely prevails in refocusing Volvo on China's premium market, it could chart a course for other Chinese firms with global ambitions.

The Volvo Concept Coupé, to be unveiled later on Tuesday at the Frankfurt auto show, is a sign that Chinese ownership wants to shed Volvo's sober image and grow sales significantly - by taking on established luxury brands such as BMW (BMWG.DE: Quote), Daimler's (DAIGn.DE: Quote) Mercedes-Benz and Audi (VOWG_p.DE: Quote).

According to four people close to Volvo and Geely, the Chinese firm's billionaire owner Li Shufu believes China, where more than 1.2 million premium cars were sold last year, is key to Volvo's future, and will help it hit a target of doubling annual global sales to 800,000 vehicles by 2020. Volvo's year-on-year China sales grew by two-thirds in August to 4,319 cars. January-August sales were up 40 percent to 37,661 cars.

To get to its target, Li, who is chairman of both Geely and Volvo, wants the Swedish carmaker to come up with a large premium sedan aimed at China's newly wealthy who tout their social status with German luxury cars, such as the Audi A8 and BMW 7-Series sedans.

Managers at Volvo are not keen. Hakan Samuelsson, chief executive since late last year, believes it's too big a risk for Volvo to give up a niche cultivated over decades with a focus on safety and Scandinavian understatement and try to take on German luxury car makers.

"Volvo will never compete in that segment where customers are expecting to have V12 or V8 engines. Volvos are 4-cylinder and 6-cylinder engine cars," he told reporters in June at a plant opening in the southwestern China city of Chengdu. "Showing off has never been part of the Volvo brand."

A BIT OF A STRETCH?   Continued...

An undated handout picture provided to Reuters on September 4, 2013 shows a Volvo Concept Coupe driving past a building. REUTERS/Volvo Cars/Handout via Reuters