Geely Eyes China Market to Revive Volvo Brand

SHANGHAI/HONG KONG - Li Shufu, the plain-spoken chairman of China's Zhejiang Geely Holding Group, faces a long, uphill journey to return Ford Motor Co.'s prestigious but money-losing Volvo brand to profitability, Reuters reported. But he also has an equally big opportunity – the chance to use the foreign brand to ramp up sales in the world's largest car market. China, which overtook the United States as the world's No.1 auto market last year, has become something of a safe haven for carmakers such as General Motors Co. and Toyota Motor Corp. that have been battered by a steep global industry downturn. Like many Chinese automakers, Geely hopes someday to emulate the global success of Japanese and Korean players like Toyota, Honda Motor Co. and Hyundai Motor Co. Owning a global brand like Volvo gives Geely a chance to build up its profile in China, where it is known more for small, inexpensive cars, and to catch up with its bigger state-owned rivals, who have long partnered with the likes of GM and Volkswagen , analysts said. Shares in Geely Automobile Holdings Ltd. closed up 1.5 percent on Monday, after rising as much as 5 percent in intraday trade to a two-month high on expectations that the Hong Kong-listed automaker will benefit from its parent's deal. Geely Automobile said the parent company would sell all or part of the Volvo business to the listed company if approved by independent non-executive directors of Geely Automobile. Li, a self-made entrepreneur who built Geely from nothing into the country's 10th-biggest car maker in less than two decades, is banking on China as a saviour for Volvo. The charismatic founder said on Monday he aimed to turn around Volvo within two years. He is already planning a factory in Beijing that will make 300,000 Volvo branded cars a year, doubling its current output. "Geely is going to have to ask why Volvo wasn't successful in the past and what it will take to make it successful now," said John Bonnell, a senior director of strategic advisory services for J.D. Power Asia Pacific. Importantly, Geely has the backing of the Chinese government, which is eager to bolster the country's young auto industry. In a rare public demonstration for a private-sector company, Beijing dispatched its vice president Xi Jinping to Gothenburg, Sweden to attend the signing ceremony for the Geely-Volvo deal over the weekend. "At the end of the day, Geely has to win the hearts and minds of Chinese buyers with its China-made Volvo. But Beijing's backing could get Volvo on to the government procurement list as the initial step," said IHS Global's Zeng.