Aug 042010

Chinese Volvo

China’s meteoric rise to become the center of the world’s automotive industry was well documented last week in our article and video on SAIC’s YEZ Concept car. This week another Chinese manufacturer is making global headlines by buying Volvo Automobiles. Unlike Government-owned SAIC, Volvo’s purchaser Zhejiang Geely is a public company controlled by Li Shufu (top left) a self-made 47 year-old billionaire who is being heralded as China’s Henry Ford. Geely’s ambition knows no bounds – it already plans to produce the world’s cheapest car (the tiny gullwing at top right), has a range of green drive trains ready for market including full electric and parallel and serial hybrids, has plans to produce a serious sports cars (bottom right) and now the first fully-owned Chinese prestige auto brand looks set to grab a fat slice of the Government fleet which makes up 8% of China’s auto market.

No-one blinked when Ford bought Volvo a few years back, but the concept of what is effectively a Swedish brand being owned by the Chinese is stretching a few brain cells. Coming hot on the heels of the purchase of the British MG marquee by SAIC and Jaguar and Land Rover by India’s Tata, it’s clear to see that the forces of change are afoot in the automotive industry. Existing automotive brands have saturated their own domestic markets and are now faced with stiff local competition for the massive emerging markets of China and India, and to a lesser extent, Brazil and Russia.

Last year China became the largest producer of automobiles and the largest consumer of automobiles simultaneously.

The Chinese government is making no secret that it wants its massive domestic market to buy more Chinese-owned cars. Just as nouveau riche have done across the world and across the ages, Chinese consumers have emerged in one generation from dire austerity to affluence and they are keen to display their newfound wealth and research heavily reinforces the Chinese marketplace’s obsessive brand consciousness.

Two out of every three automobiles sold in China are foreign brands produced under 50-50 partnerships, so the call has gone out to develop the percentage of fully-owned brands and there will be a number of financial incentives which will help persuade China’s populace to buy Chinese over the next few years. China’s largest auto maker, Government-owned Shanghai Automotive (SAIC) is investing US$1 billion in the development of its own brands, and it’s more than likely that Volvo will not be the first established brandname to be purchased by a Chinese auto manufacturer.

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