Volvo Will Invest $11 Billion in Next Five Years
The money is going to be used by Volvo to upgrade its product and technologies as it seeks to double sales to 800,000 units by 2020 – more than double its sales in 2010 of 373,000, according to a report that was published in Friday's Wall Street Journal.
Geely is making this major investment with the belief that China is going to be a major market for the Swedish auto maker. It predicts that half of the growth of 400,000 in annual sales will be in China. Last year, according to WSJ.com, the company sold 30,500 vehicles there.
At a Beijing news conference today, Feb. 25, Volvo further defined its plans for how the $11 billion will be spent in the next five years. Pending Chinese sign off, Volvo will build a new plant in Chengdu and consider constructing another plant in Daqing. The Chengdu plant, which is about 1000 miles west of Shanghai, will solely manufacture Volvo cars and trucks. It is expected to churn out about 100,000 vehicles yearly. It is slated to be up and running in 2013.
"We regard the Chinese market as the second home market for Volvo Car Corporation and a very important part of the plan to build a successful future for the company," said Stefan Jacoby, President & CEO Volvo Car Corporation.
Volvo is pushing ahead full steam in China, which is the world's most populated country, with plans to increase it dealership network from 106 to 220 by 2015. An entirely new Volvo organization has been created in China under Freeman Shen, Senior Vice President and Chairman of Volvo Cars China Operations. A new Volvo China headquarters has been established in Shanghai, including a technology center and all functions for purchasing, design, sales and marketing, manufacturing, finance, etc.
The Shanghai operation is also going to play a role in future product development for Volvo. It will support R&D in Sweden regarding the development of electric vehicles and hybrids. China has a stake in developing alternative fuel vehicles because of the size of the country and already crippling smog problems in major cities like Beijing that impacted the 2008 Summer Olympic games.
"The Volvo Car China Technology Centre in Shanghai will develop into a complete product development organization on an international level. It will have the competence and capacity to work together with the HQ in Sweden, participating in Volvo Car Corporation's work process for developing entirely new models," said Freeman Shen.
In contrast to remarks he made earlier to AutoCar in Britain, Stefan Jacoby also emphasized that Volvo will continue to be a contemporary luxury brand, with products built around people. "The key strategy for Volvo Car Corporation is to continue to strengthen its business presence in mature markets like Europe and America while proactively exploring new emerging markets," he said. In January he was quoted as saying, “Let’s ditch this talk about premium. It sounds like a pricing strategy and it’s got an expensive ring to it. We need to focus on elegant Scandinavian simplicity, our own unique identity, and not copy our competitors.”
Li Shufu, Chairman of the Volvo board, reinforced the point. " A more globalized, more luxury brand will turn our vision of a growing and profitable Volvo Car Corporation into reality. The company will continue to contribute to the development of the global auto industry by introducing world-first innovations that make an outstanding brand win in the marketplace," he said at the announcement in Beijing.
Volvo also projects doubling growth in the United States to 120,000 vehicles, up from the 54,000 it sold here last year. Because Volvo doesn't manufacture cars in the U.S. (like BMW does), it faces the challenge of overcoming a weak dollar that makes importing cars much more expensive.
There have been some recall issues plaguing Volvo recently in the U.S. The National Highway Traffic Safety Administration reported that Volvo recalled a limited number of 2010 XC60 sport utility vehicles due to a concern over faulty airbags. There was also a recall for the S40, S60, V50 and XC60 models from 2009-2011 based on a concern over the amount of travel in the front passenger’s seat rails. There was also another recall for a variety of 2011 models, including the S60, S80, XC60 and XC70 for concerns over the engine control module cutting fuel from the engine.