Volvo’s China Problems Put into Words

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Volvo is Swedish? Volvo is Chinese? The Chinese government cant make up its mind, the same for Taiwanese Yulong motors who recently set up a joint venture with Dongfeng, surely if Taiwan is forever an inseparable part of China then Taiwanese auto companies do not need to set up a JV in the mainland Chinese market, the government thinks otherwise.

Caixin is reporting on Volvo’s China conundrum, initially it was thought that Volvo would be able to open factories as an independent operator and avoid the Chinese system of having to have a JV partner in the car making business, the Chinese government are saying a JV is a must.

New models bearing the Chinese-owned Volvo badge shared a luxury spotlight at the Beijing International Auto Show in April with perennial stars Mercedes-Benz, BMW and Lexus.

But behind the diamond-studded presentation was confusion over the legal status of Sweden-based Volvo Car Corp., it’s business operations in China, and the company’s owner China Zhejiang Geely Holding Group Co. Ltd.

Geely bought Volvo from Ford Motor Co. in August 2010 and soon unveiled a five-year plan that called for new factories in Chengdu and Daqing, as well as a Shanghai headquarters. The company said it would ramp up domestic sales to 200,000 vehicles annually by 2015, grabbing about 20 percent of China’s luxury car market.

So far, though, the plans have stalled over legal complications. The company’s request to build factories, for example, has yet to be answered by government market planners.

The company is also caught between very different legal systems: While Volvo is officially a foreign company operating in Sweden under Swedish law, it’s treated as a foreign company in China under Chinese law.

Geely officials are trying to iron out the confusion – and keep the business plan on track.

For example, under a proposed modification to the five-year plan announced recently by Shen Hui, chairman of Volvo’s China operations, Geely and Volvo would form a new joint venture for all operations in China. The venture would be foreign-financed but domestically controlled.

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3 Comments

  • MannyZ
    May 30, 2012

    I think that the Chinese government has to ease the rules on Volvo. If not, other chinese companies will not venture to look for good purchases of other good auto factories that thier luck ran out temporaraly. Besides, lets be fair here, chinese companies are buying many other western companies with out JV rules, like AMC or many constraction and mining companies.

  • dragin
    May 30, 2012

    We might ash ourselves whether state-owned BAIC, had it been the buyer of Volvo, would have had to jump through the same hoops to operate in China. I don’t think so. It seems private companies like Geely are held to a different standard.

  • MannyZ
    June 2, 2012

    Agree, that could be to protect gov. owned industries.

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