×

Volvo Cars to Manufacture Autos in China in 2013: CEO

Swedish automaker Volvo Cars said it will begin making cars in China in 2013 and will need two more plants to quickly tap into the world's largest auto market.

Members of the media inspect Volvo's latest model, Volvo S60, during the New York Auto International Show in New York City in 2010.
Ramin Talaie | Getty Images
Members of the media inspect Volvo's latest model, Volvo S60, during the New York Auto International Show in New York City in 2010.

In an interview with CNBC, Stefan Jacoby, Volvo's president and CEO also said he is considering exporting the cars made in China to advanced markets like the U.S. in what would mark a first for a major auto company.

"I think the world is ready to say accept Volvo cars made in china to be exported to other countries as well. It is essential and I can assure that the cars we produce here do have the same quality standards as the others manufactured in Europe," said Jacoby, who was picked to turn around Volvo six months ago when it was bought by Geely Holdings.

The cars made in China would have a local content ratio of about 80 per cent, the CEO said, but would continue to cater to the luxury segment of the market. As sales in China's premium segment double each year, Volvo has said it hopes to sell 200,000 cars in China by 2015.

Analysts say Volvo has a lot of catching up to do since rival German brands like Audi set up assembly plants in China years ago.

Although Jacoby said Volvo would share logistics and sourcing expertise with Geely, he said there were no plans to share manufacturing facilities as Volvo would continue to cater to the premium segment whereas Geely would focus on entry-level models.

Jacoby said the company has not finalized plans for cars tailor-made for the Chinese market, adding that the company would unveil details at the Shanghai motor show in April.

Volvo managed to eke out a profit last year, but it was unable to benefit from the recovery in the key U.S. market, mostly because it suffers currency losses as it exports entirely from Europe.

"Our most vulnerable area is the US dollar. And we need to look for long-term solutions and china could play a part in that," Jacoby said. "We could consider to export cars out of china into NAFTA and the U.S. but in the long term we need to think of a clear natural hedge against the US dollar, and that means we are taking into consideration also manufacturing and sourcing in NAFTA."

The U.S. market is Volvo's biggest and analysts say success there will be crucial if it plans to sell 800,000 cars by 2020.