5 Questions With Volvo Cars CEO

Volvo Cars unveiled a luxury concept car “Concept Universe” at the Shanghai auto show this week, giving the public a glimpse of what its future Made-in-China vehicles will look like. Since the Swedish carmaker was bought over by Chinese auto giant Zhejiang Geely in 2010, it has been racing to make deeper forays into the Mainland. CEO Stefan Jacoby tells Managing Asia how the iconic Scandinavian brand is holding up under new Chinese ownership, and how he plans to fast-track Volvo’s presence in the world’s largest auto market.

Q. Why have you decided to build new factories in China?

Stefan Jacoby, the CEO of Volvo Cars. The company plans to sell 200,000 cars in China by 2015.
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Stefan Jacoby, the CEO of Volvo Cars. The company plans to sell 200,000 cars in China by 2015.

We have decided to build up to 3 plants here in China. That is a significant globalization of Volvo cars. We are used to export out of European production bases. Now we are getting truly global. We will start our first plant in Chengdu and then in the right sequence, depending also how we grow, we will follow up with additional plants.

We want to grow up to 200,000 vehicles (in sales) here by 2005. We will bring tailor-made products for the Chinese market out of these factories.

Q. What fundamental difference is there in the way Geely makes cars and Volvo makes cars? Why not use an existing Geely factory?

I think it would be not logical to put both brands in one factory. Geely makes cars primarily for the Chinese market. They are delivering to the so-called entry market.

Volvo is a premium brand. We are building upscale (cars). We are using different technology and it would be too complex to mix up these 2 brands in one factory. What we need also to acknowledge we have agreements with our former owner Ford. We of course need to be compliant in respect of these agreements, in respect of the intellectual property rights.

Q. Were there any points of contention between you and Geely management in coming up with this new strategy for China?

No. Why? We have a very broad experienced board for Volvo cars to which I report. I'm not reporting to Geely management obviously. It is a composition of board members with a deep understanding of our industry. (They) also come from other sectors and we have fruitful discussions about the future and strategy of Volvo cars.

Q. Are there discussions about selling Geely cars through your dealerships in advance markets?

That wouldn't make any sense. Volvo dealers are Volvo dealers, and Geely dealers are Geely dealers. We are a premium segment and Geely is in the entry segment. But wherever we can, we will cooperate.

We will support Geely in aspects like safety. We are working in identifying shared technologies when it comes to electrification, and we are working very close together when it comes to sourcing here in China. We can actually utilize what Geely has done here in China.

But when it comes to point of sales, Geely and Volvo will definitely remain totally separated. Volvo is a European, Scandinavian, Swedish premium brand, and regardless of the ownership and regardless of intents, we remain a premium and luxury brand.

Q. Some frustrations from CEOs when they partner here in China, is that they see their partner coming out with something very similar to their original product, and they become competitors in the end. Do you share this concern?

This is a view from experiences of others in the past. I think that China is getting a reliable partner. And the step that Geely has done in acquiring Volvo is a clear signal that China wants to be a true fair partner of the global economy.

The issue of intellectual property rights is getting much more stable and controlled. I think that the Chinese administration clearly understands that this is a prerequisite to be a fair and open partner.

This is an excerpt taken from CNBC’s longest-running feature program Managing Asia. Catch the show with anchor Christine Tan over the weekend on CNBC.