According to "Nihon Keizai Shimbun" reported on May 21, Swedish high-end car maker Volvo Car intends to cultivate China into an export base. The company plans to start the production of the most upscale models of cars at the Daqing plant as early as May, and from the summer of 2017, it will begin exporting to the European market and other global markets. It is rare for automakers to export high-end vehicles from China. The production capacity of Volvo Cars in China is also planned to increase to 1.5 times the current level by 2020, reaching 300,000 vehicles. It will restructure its global strategy, including production, with China, the main market of the parent company Zhejiang Geely Holding Group, as its center.
At the Volvo Car Daqing Plant on the outskirts of Daqing City, Heilongjiang Province, near the Russian border, the capacity expansion project ushered in the final stage. The assembly line of the car body is being set up in the factory. At present, the plant mainly produces cars that are sold exclusively to China, and has an annual production capacity of 80,000 vehicles. It is planned to expand to more than 150,000 by 2020.
While advancing the expansion project, Volvo Cars is also actively providing technical guidance to young Chinese technicians in their 20s. The 50-year-old Belgian skilled technicians from the European main factory performed the installation angle of the bumper on the front side of the vehicle body and the installation sequence of the components in the hood according to the company’s standard called “Volvo Car Manufacturing Systemâ€. Very detailed guidance.
The main purpose of the expansion of the factory is to shift the production of the "S90", the most expensive car. The model currently being produced at the Swedish factory will shift production operations to Daqing from the summer of 2017. We plan to start production in the local area within 5 months. According to Hankke Samuelson, CEO of Volvo Cars, “Starting production at the Daqing plant with the S90 will start China into a global manufacturing and export center.â€
Volvo Cars was once affiliated with Ford Motor Company of the United States, but it was acquired by Geely for 1.8 billion US dollars in 2010. The business is currently under reconstruction with the support of Geely. Focus is devoted to expanding business in Geely's main market, China. In 2015, sales volume in China accounted for 16% of the total and increased to 80,000 units. Global sales volume reached 500,000 for the first time. It increased to 530,000 in 2016.
The key to Volvo Cars' next global business is the expansion of production in China and the expansion of export bases that accompany the expansion of production. At present, the total production capacity of Volvo Car's Daqing Plant and Chengdu Plant is 200,000, and it is planned to increase to 1.5 times the current 300,000 by 2020. Of these, up to 100,000 vehicles will be exported. Although there are examples of exporting low-priced small cars to Southeast Asia and Africa, the export of high-end cars to be manufactured in China is still a special case.
Marc Gombeer, general manager of Volvo Car Daqing Plant, said, "Although we need to increase transportation costs, we can reduce production costs by restructuring the production of each model on a global scale." The company did not disclose the cost of production in China, but Tang Jin, an investigator at Mizuho Bank, who is familiar with the Chinese auto industry, believes that "production costs such as labor costs and plant operating costs will drop to less than half of Europe."
In addition, the methods and costs of transportation will be readjusted. The cars produced at the Daqing plant are currently being shipped from the factory using trucks and then transported to Europe via the Siberia railways. In the future, plans will be made to extend the Siberian rail extensions to the factory.
On the other hand, Volvo Cars also intends to strengthen its sales in China. The company plans to have a global sales volume of 800,000 by 2020, of which 200,000 will be sold in China. There are currently more than 200 stores in China, and it is planned to expand the store network to local cities and increase it to more than 400 by 2020.
Zhou Guihua, general manager of "Shanghai Qiyun Qihao" in the Shanghai Volvo Car Store, said on the client level, "There is a certain amount of income that goes without saying that doctors, lawyers, university professors and other people with high educational levels are more." Allegedly, 70% of customers who visit stores have cars. The purpose of visiting stores is to consider changing new cars or buying second and third cars.
Yang Jiajie (32), who works for a securities company in Shanghai, is currently driving a premium car “Buick†from General Motors (GM) and is considering replacing Volvo SUVs. Yang Jiajie said that "(the car) is well-designed and that there are 4-year-olds in the family and they also care about safety."
Volvo Cars intends to expand its business centered on China. Regarding exporting high-end cars from China, Marc Gombeer, General Manager of Daqing Plant, said, “I understand that some people are skeptical about the quality of Chinese manufacturing,†but he also said confidently, “Volvo Cars use globally. The general manufacturing system is just like the Chinese-made iPhone is sold all over the world. In the automotive field, Chinese manufacturing will also become the world standard."
In addition, "if the Chinese exports are recognized in the European and American markets, brand influence will increase, and sales to China will also be beneficial" (Mizuho Bank investigator Tang Jin). The complementary effects seem to be worth looking forward to. Volvo's attempts may become an opportunity to fully export Chinese-made cars, so auto makers are eagerly concerned.
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