June 29th Newsletter (Newsletter8)

Hi {name},

When rumors first came out that the low cost economy car maker Geely were intent on taking over Volvo, the car maker with the highest perceived quality levels in the automotive world, the automotive world was turned on its head. How could Geely take over such a high end automaker and make it end well? The answer of course was with leaving Volvo as an independent company and introducing it to the lucrative Chinese car market. The Chinese luxury car market seems to be recession proof, during the 2008-2010 economic crises it appeared that the German three of Audi, BMW and Mercedes were virtually unfazed by the slow down felt elsewhere in the Chinese auto market. Audi’s 2010 sales reached 227,938 units in China alone, whilst BMW sold 168,998 units and Mercedes sold 147,670 cars, on the other hand Volvo sold a mere 30,000 vehicles in China, 7 times smaller than Audis sales figures.

Volvo’s CEO Stefan Jacoby had previously announced that they hope to gain 20% of the Chinese luxury car market by 2015 with sales of around 200,000 vehicles in China alone, to achieve this Volvo are already improving their range of locally produced vehicles. When Geely bought Volvo it came with the Volvo-Chang’an joint venture partnership based in Chongqing that was developed when Ford was in charge of the Swedish brand, that contract is likely to expire in the next few years and will unlikely get renewed, the joint venture produces the rapidly aging S40 and S80L (the latter being assembled from kits) but also sells the C30, XC60, XC90 and S60 in the Chinese market. Volvo are also planning to set up two factories in China, one in the frigid climbs of Daqing and another in the steamy hot city of Chengdu. Volvo seems to be playing the Chinese game very well, by avoiding the packed coastal cities it will have lower overhead costs, especially in cities such as Daqing which are eager to attract foreign investment to offset their traditional oil industry.

Will Volvo be able to catch up with Audi in the next decade? There is always the chance. Audi has become the car of choice for Chinese government ministers, but if there is a local premium brand there is every chance that it will become the standard car for mandarins across China.

The other Swedish brand, Saab, seems to be clinging to life this week with media reports indicating that the car brand has once again managed to avoid bankruptcy for yet another month with a cash injection from an unknown Chinese car company that wanted to order new cars. Media sources have not yet mentioned which company it is. The unnamed saviour could well be Pangda who will be eager to see the 1000+ car order they made earlier this month being delivered.

On the sales front, it’s likely that June’s sales figures will be yet another wash out due to major flooding that has affected Southern Chinese cities and provinces over the past month, even Xinjiang and Beijing have been affected by the floods. If early indicators prove to be correct, it will be the third continual month that sales have declined,
if no sales positive sales factors appear in the next half of the year then many companies will no doubt miss their often lofty sales goals for 2011.

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