Geely Holding will strengthen its Volvo and Emgrand brands with greater emphasis on quality components and engineering, targeting both the local Chinese market and mature international markets.
IHS Automotive perspective | |
Significance | Geely and Volvo will strengthen the sharing of technology to build on existing brands such as Volvo and Emgrand. |
Implications | Geely Holding aims to ramp up sales both domestically in China and in established international markets with models under both the Volvo brand and Geely's Emgrand brand with exports likely by 2016. |
Outlook | Geely's next round of models under both its Volvo and Emgrand and other brands is likely to see greater emphasis on new technology and will share common component sourcing. |
Volvo Car Group has received formal approval for production in China, the company says in a press release. The plants at Daqing in Heilongjiang province and Zhangjiakou in Hebei province have been approved, so the automaker can commence with volume production at its plant in Chengdu in Sichuan province.
The assembly plant in Daqing is under construction and the first pre-series cars will be built in late 2013 for training purposes. The plant is forecast to be fully operational in 2014. The engine plant in Zhangjiakou will become operational during autumn and will deliver engines to Volvo Cars' manufacturing plant in Chengdu, where serial production will start in the fourth quarter. Zhangjiakou will also supply the assembly plant in Daqing.
The plants in Daqing and Zhangjiakou will be operated as two joint venture (JV) companies, in which Volvo Cars initially will hold 30%. The remaining part will be held by companies within Geely Holding Group. The Chengdu plant will be operated under an extension of an existing production licence held by a Geely Holding Group company. The manufacturing licence for Chengdu was granted in June.
The plants in China will be operated in full accordance with Volvo Cars' manufacturing standards and procedures, equal to those of the company's European plants. Volvo and Geely will also commence production of jointly produced models. The models to be developed jointly will also target export markets – a core growth strategy for Geely.
Outlook and implications
Volvo has been gaining different necessary approvals for commencing production in China at its own production plant. In 2012, it was granted the first round of approval for the Chengdu plant and in March this year received another round of approvals for its other component and assembly plants (see China: 19 March 2013: Volvo receives go-ahead for four facilities in China).
Models jointly developed by Volvo and Geely are already in the pipeline with a likely outcome being the next generation of models under Geely's Emgrand brand having a stronger influence from Volvo's engineering team. This increased sharing and working together will also influence the next generation of Volvo models (see China: 18 March 2013: Volvo, Geely to launch new car together in 2014). Geely Holding, the owner of both Volvo and Geely, is likely to concentrate on strengthening the existing Volvo and Emgrand brands rather than creating a new brand.
Volvo aims to hit its sales target of 200,000 units by 2018 – two years earlier than planned. Volvo is aiming for annual global sales of 800,000 cars by 2020, up from 373,000 units sold in 2010.
Geely has seen its exports rise by double digit percentages in the first seven months of the year, on the back of strong demand for its Emgrand brand models (see China: 20 August 2013: Geely exports increase 27% in January–July, launches TX4 in Nanjing).
The new plants in Hebei and Heilongjiang will assemble and supply models under both Geely and Volvo. The engine plant in Hebei will, for example, supply engines for both Volvo and Emgrand models.