Volvo could become one of the first automakers to sell Chinese made cars in the United States, according to a US business newspaper.
Zhejiang Geely Holding Group, owner of Volvo, and the Swedish car maker’s management team are considering exporting Volvos assembled in China to the US – a potentially risky move that might harm the brand’s Scandinavian identity, the Wall Street Journal reported.
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It quoted new Volvo CEO Stefan Jacoby, previously with Volkswagen US which is again planning to build cars in the US, as saying he saw the potential move as a way to help his new employer reduce foreign exchange risk.
Exporting made-in-China Volvos is “one opportunity” Volvo is exploring with Geely as part of a strategic plan it is preparing for release by March, he said.
The strategy is focused heavily on an effort to boost demand for Volvos in China by putting in place more capacity to make the cars there and develop more luxurious and large vehicles.
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Another option the company is weighing is to build a Volvo assembly plant in the US, an individual close to Geely told the WSJ.
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By GlobalDataVolvo and Geely already have decided to assemble more Volvos in China, Jacoby said on the sidelines of the show this week. He said Volvo was likely to build new manufacturing capacity in multiple locations but the decision hasn’t been made on whether to export vehicles.
Ford, which sold Volvo to Geely, has been producing Volvo cars in China for several years [at a three-way JV factory with Mazda] and will continue to do so for Geely and Volvo. But none of these vehicles are exported to the US.
Volvo is trying to reduce currency-exchange risk around the world, especially the euro-US dollar exchange that has eroded the profitability of shipping to the US Volvos produced in Sweden and Belgium, the WSJ noted.
“The major challenge here in the US is that we’re too dependent on euro-US dollar exchange rates,” Jacoby said.
“China offers an opportunity in that respect. It doesn’t get rid of but at least allows us to reduce currency risk exposure.” The Volvo CEO cited the relative stability of the Chinese yuan against the dollar.
The move would mean Volvo would tread onto the unbeaten path to sell Chinese-manufactured premium cars in advanced markets such as the US, although Honda exported Chinese built Jazz models to Europe for several years until production transferred to its UK plant.
While Americans readily accept a multitude of products made in China, including high-tech gear such as computers and iPhones, no Chinese-made cars are sold in the country.
Some low-volume small commercial vehicles are imported and sold for off-road use.
Two individuals close to Volvo and Geely told the Wall Street Journal that, while the Hangzhou-based auto maker, which finalized its acquisition of Volvo last year, would welcome the move, its wisdom is likely to become “a point of contention” with Volvo’s board.
As part of the consideration to export Volvos from China, Volvo and Geely are also mulling building a new Volvo assembly plant in the southwestern China city of Chengdu, next to a nearly completed Geely factory.
Geely chairman Li Shufu told the WSJ in September that Geely and Volvo were looking at this existing facility as a way to quickly start producing Volvo cars in China and boost sales.
Li said at the time that Volvo and Geely plan to build as many as three assembly plants in China over time, to make a total of up to 300,000 of the Swedish brand’s vehicles a year, and that they were looking at Chengdu, Shanghai and the northeastern city of Daqing as possible sites.
This week, one of the knowledgeable individuals told the paper one clear benefit of building a new ‘green field’ plant in Chengdu is that it would allow Volvo to implement and carry out ‘Volvo production systems’ in producing Volvo cars from the ground up.
That, he said, might help ease the possible reluctance of American and other global consumers to buy Chinese made Volvos.
