Zhejiang Geely Holding Group has won support from Chinese officials to buy Volvo Car Corp. from Ford Motor and will seek to sell Volvo sedans as China’s official cars, now dominated by Volkswagen AG’ Audi brand, Bloomberg reported.
Geely intends to boost Volvo sales in China, the world’s largest auto market, ninefold to 200,000 a year within five years, Chairman Li Shufu said on March 28, after the company signed a deal to buy Volvo from Ford Motor for $1.8 billion.
A crucial consumer group in China for Volvo cars may be the large number of Chinese government agencies, which spent 80 billion yuan ($12 billion) on official vehicles in 2008, an expenditure ever increasing in the years to come.
“Volvo has an image of being high-end and low-key, which is perfect for a government official’s car,” said Yu Bing, a Shanghai-based analyst. “It may pose more of a threat to Audi and BMW.”
After its purchase by a Chinese automaker, Volvo’s appeal to local officials may be boosted. Audi, the biggest supplier of official cars in China, now gets about 20% of local sales from the government.
“Geely’s got very strong support from both the central government and local government,” said another Shanghai-based analyst. Winning official car orders is “the first step” in turning Volvo around.