The officials in China have finally given a green signal to Volvo’s plans of establishing new manufacturing plants in Zhangjiakou and Daqing provinces of China. As a result of this much awaited approval, Volvo will now have an entirely Chinese Industrial base which even includes the company’s current site located in Chengdu.
The manufacturing unit in Daqing is already under construction and the company is expecting the construction to be completed soon. The company has stated that this new plant in Daqing will be fully functionally in the next year. Talking about the company’s other plant in Zhangjiakou, its construction will be completed by the end of this year. This plant in Zhangjiakou will manufacture Volvo engines and will be used to fulfill the requirements of the manufacturing units in Daqing and Chengdu.
The Chinese judiciary has set a rule according to which the foreign companies cannot start independent firms in the country. They are allowed to step into the nation through joint ventures with Chinese companies. Therefore, to comply with this requirement, the new plants, mentioned above, will be a joint venture between Volvo and Chinese car manufacturer, Geely. It is expected that the relationship between Geely and Volvo will strengthen further in the time to come.
In February 2013, Geely and Volvo had announced that they will be working together in developing a ‘next gen small car platform’. Both the firms confirmed that they will also set up a new Research and Development Center in Volvo’s home town which is Gothenburg in Sweden. This new Research facility will be utilized by this alliance to develop the small car platform. This alliance will launch their first car based on this ‘new platform’ in the year 2015.
CEO of Geely, Mr. Gui Sheng Yue told in interview to Bloomberg that “We have entered into actual research and development stage and I believe we can see the new product in the year after next.”
With 2 new plants in the country, Volvo is trying to increase its production capacity as well as improve its access to the Chinese auto market. This strategic move will help the company in doubling its total sales in China to around 800,000 units by the end of this decade. However, the company has not yet confirmed whether the Chinese built vehicles will be exported by them or not.
While Volvo is planning to double its sales, its Chinese partner Geely is also keen on seeing improved sales figures. Geely is planning to launch new models which will rank high on safety as well as overall quality. This will be an outcome of its alliance with Volvo. Geely is also planning to launch electrically powered models in China under the brand name of “Emgrand” which is owned by Geely. The engines for the electrically powered vehicles will be designed and developed by the Geely along with American based business partner, Detroit Electric.