Consumers unsure of Geely-acquired Volvo cars

14:36, May 20, 2010      

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Will the Volvo brand maintain the same high level of quality for which it was known prior to its acquisition by Chinese automaker Zhejiang Geely. Reporters received this kind of question many times since Geely finished its acquisition of the Swedish-based car company. Geely's president Li Shufu told the media on many occasions that the acquisition is only limited to the operation of capital and Volvo, as an independent brand, will retain its manufacturing base in Europe.

Therefore, the relationship between Geely and Volvo is more like that which exists between two brothers, not that of a father and son. Around 40 percent of consumers, based on a survey of 654 respondents, still show concerns about the quality of Volvo under the ownership of Geely and said they would hesitate to buy it, according to a survey conducted by China Youth Daily recently.

Volvo saw 10 consecutive years of losses since it was purchased by Ford in 1999, and losses amounted to 934 million U.S. dollars and 1.6 billion U.S. dollars in 2009 and 2008, respectively. Geely President Li Shufu's first remedy for stopping loss is to rapidly expand production and sales.

Li believes Volvo' investment in R&D is almost as much as BMW and the Benz, while the scale is smaller than the latter, so the higher cost per vehicle led to losses. Geely will find ways to make good use of Volvo's IPR and technology to increase sales. The expanded production and sales will, in turn, reduce the cost of each car and make profits.

The number of annual sales of Volvo at present is 400,000 and it will reach 1 million in the next four to five years, according to Li's plan.

Insiders say being good at cost-control is the advantage of private enterprises, which is also the main reason behind Geely's rapid boom in recent years. Volvo can acquire experience on cost-control from Geely and turn the company around quickly. Although energy-saving features, eco-friendly designs and safety are the main trends of car industry, if costs can not be controlled, establishing large-scale marketing is impossible.

Li mentioned his advantage to media many times. "Australia's DSI planned to invest 1 billion yuan to start a plant, but we budgeted only 500 million yuan to do the project," said Li.

Li's plan may sound reasonable. However, if Geely's cuts to the cost of components and parts leads to a drop in the safety and quality of the car, it will further raise customers' fears.

Analysts think Geely needs to take measures to enhance Volvo's reputation, such as setting up an independent automobile quality-supervision commission, and inviting consumers to visit Volvo plant, etc. And consumers should be told that future cost-cutting is based on Geely's familiarity with China's market and will be realized through marking, rather than auto quality and parts procurement.

Tong Zhiyuan, in charge of the Volvo project, knows how to avoid consumers' doubts, but he declined to give details.

By People's Daily Online


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