Volvo Car Corp. and Zhejiang Geely Holding Group Co. plan to form a carmaking venture as part of a deal to expand the world’s largest vehicle market.
Zhejiang Geely Holding Group Co., which is considered a foreign carmaker, awaits approval from the National Development and Reform Commission for a proposed plant in the southwestern city of Chengdu. Volvo plans to invest almost $11 billion worldwide in the following five years, including China, where rising affluence and lower vehicle-ownership levels helped the world’s second-largest economy overtake the U.S. as the biggest vehicle market in 2009.
In August 2010, a Chinese consortium including Zhejiang Geely bought Volvo for $1.8 billion. Zhejiang now owns 51% of the company, while Chinese provinces of Daqing and Jiading have 37 percent and 12 percent respectively.
Volvo, which makes the S40 sedan and XC90 sport-utility vehicle, plans to build another plant and engine factory in Chengdu, Freeman Shen, China, aiming at doubling the sales to 800,000 units until 2020. There are some requirements for a Chinese carmaking joint venture, which include the fact that Volvo will also introduce a new China-only brand and more fuel-efficient vehicles.