Geely chairman Li Shufu is banking on China’s auto market, now the world’s largest, as a savior for Volvo, a brand that the legendary private Chinese carmaker has just signed a deal to buy for $1.8 billion from Ford Motor, Reuters reported.
Self-made entrepreneur Li built Geely from nothing into China’s No. 10 carmaker in less than two decades. The charismatic founder aims to turn Volvo’s loss-making into profit within two years. He is already planning a factory in Beijing that will make 300,000 Volvo cars annually, doubling its current output.
Importantly, Geely has the backing of the Chinese government, which is eager to bolster the country’s young auto industry. China’s vice president Xi Jinping arrived in Gothenburg, Sweden on Saturday as the last leg of his Europe tour to attend the signing ceremony for the Geely-Volvo deal over the weekend.
“Geely has to win the hearts and minds of Chinese buyers with its China-made Volvo. But Beijing’s backing could get Volvo on to the government procurement list as the initial step,” said John Zeng, an analyst with IHS Global Insight. “China is the crucial market for Li’s effort to turn around Volvo.”
“If he can make Volvo profitable in China, that would at least help offset losses in European operations and keep them up and running,” Zeng said. “Overseas markets are important for Li, too, but it’s obviously not feasible to count on Europe or the US to revive Volvo.”
China overtook the United States as the world’s No. 1 auto market last year and has become a safe haven for global carmakers like General Motors and Toyota Motor that have been battered by a steep global industry downturn, Reuters said.