Volvo to develop with Geely, build in China

Chinese officials have given approval for Volvo to establish new plants in Daqing and Zhangjiakou. As a result, Volvo's full Chinese industrial base, including a current site in Chengdu, has been approved.

An assembly plant in Daqing is under construction and is expected to be fully operational in 2014. The plant in Zhangjiakou will be operational by fall and will be used to build engines for cars being assembled at the Chengdu and Daqing sites.

As is the requirement in China, the plants will be operated in the form of two joint venture companies formed with a Chinese automaker, in this case Volvo’s parent company Geely. However, Volvo’s ties with Geely will soon be deepening further.

Back in February, Volvo and Geely confirmed plans to develop a next-generation small car platform together. The two said they would also establish a new R&D centre in Volvo’s hometown of Gothenburg, Sweden, which will be responsible for developing the small car platform.

The first cars based on the platform are expected to launch in 2015. “We have entered into actual research and development stage and I believe we can see the new product in the year after next,” Geely CEO Gui Sheng Yue told Bloomberg.

The increased capacity and improved access to the Chinese market is a key strategy in helping Volvo double its sales to around 800,000 units by the end of the decade. The carmaker hasn’t mentioned, however, whether its Chinese-built cars will be exported -- so there's no indication at this stage that we'll get Chinese-built Volvos here in Australia.

Geely, too, is hoping to boost its sales by launching new models with much improved quality and safety by tapping into Volvo’s expertise. The automaker also plans to launch electric cars in China under its Emgrand brand. The powertrains for the cars will be developed together with American firm Detroit Electric, which Geely has also partnered with.

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