Volvo secures Chinese approval for Chengdu factory
The Chinese government has approved Volvo's plan for a 4 billion yuan Chengdu plant, paving the way for local production of the XC60 and S60L from 2013.
Volvo has received approval from China's Ministry of Industry and Information Technology to build a new passenger car factory in Chengdu, Sichuan province. The 4 billion yuan (£400 million) investment marks a key step in the Swedish brand's expansion under Zhejiang Geely Holding Group ownership, with production scheduled to begin in 2013.
The Chengdu facility will be equipped with welding, painting, stamping and general assembly lines, and is designed for an eventual output of up to 500,000 vehicles per year. Initial production will focus on the XC60 luxury SUV and the S60L, a long-wheelbase version of Volvo's saloon tailored for the Chinese market.
What the Chengdu plant means for Volvo in China
Volvo's parent, Geely, acquired the Swedish brand from Ford in 2010 and has since prioritised localising production for the Chinese market. The Chengdu plant is central to Volvo's strategy of boosting its presence in China, where it held just 0.3% market share in 2011. Volvo has previously announced a target of selling 200,000 cars in China by 2016, a substantial increase over previous years.
Approval for the plant comes as global carmakers compete for a larger share of China's growing premium segment. Local production is essential for avoiding steep import tariffs and for responding quickly to market trends. The Chengdu site will allow Volvo to offer models specifically adapted for Chinese preferences, such as the extended S60L.
Next steps before local sales
Once construction and equipment installation are complete, the Ministry of Industry and Information Technology will conduct a final inspection of the Chengdu facility. Only after this review will Volvo be permitted to sell locally built vehicles in China. The plant's output is expected to supply both the domestic market and, potentially, export markets in the future, though initial focus remains on meeting Chinese demand.
The Chengdu approval follows similar moves by other global carmakers to establish or expand Chinese production. Toyota began local Camry production in St Petersburg earlier in 2012, while Great Wall Motor and Litex Motor signed a deal for a new assembly plant in Bulgaria. For Volvo, the Chengdu plant is a test of its ability to leverage Geely's local knowledge while maintaining its brand identity and quality standards.
- Volvo XC60: Premium SUV, global model, to be locally produced in Chengdu
- Volvo S60L: Long-wheelbase saloon, developed for Chinese buyers
If the Chengdu plant achieves its projected output and sales targets, it will become a cornerstone of Volvo's growth in China and a key asset for Geely's ambitions in the premium segment.
