Volvo Car Corp, the Swedish arm of Ford Motor Co, announced yesterday in Beijing that it would kick off production in China this year to boost its presence in the world's third-biggest and fastest-growing car market.

 

The Goteborg-based carmaker said its new S40 sedan would be assembled at Ford's joint venture with China's Chang'an Motor Corp in Chongqing Municipality later this year, under a technical licensing deal.

 

The joint venture, or Chang'an Ford, will be Volvo's third manufacturing site in Asia after those in Thailand and Malaysia.

 

Volvo executives said the company expected the new car's annual output in China to reach 10,000 units next year.

 

Volvo's plan appears to be motivated by rivals such as Audi, BMW and Mercedes, which are enjoying higher sales in China due to early local production.

 

"China will probably be the most important car market in the world within 5 to 10 years," said Fredrik Arp, Volvo's new chief executive officer.

 

Sales growth in China and other emerging markets is important for Volvo if it is to achieve its goal of selling 600,000 vehicles annually by 2009, up from last year's 444,000 units, said Arp. He became CEO last October.

 

Volvo currently sells the new S40, S80 sedan and XC90 sport utility vehicle as imports in China. In 2005, its China sales surged by 84 per cent year-on-year to nearly 5,000 vehicles, including 1,400 S40s.

 

Sales accounted for less than 4 percent of China's premium car market which was 130,000 units last year, said Per Norinder, general manager of Volvo Car China.

 

Volvo aims to increase its shares in the premium car market in China to 10 percent with the expected local production, Norinder said, without revealing a timeframe.

 

In 2005, Audi sold 59,000 vehicles in China. Meanwhile, China sales of BMW and Mercedes stood at 24,000 and 16,000 units respectively.

 

Arp also hinted that prices of the new made-in-China S40 would be more attractive to customers than comparable models from rivals.

 

"When the competition becomes tougher, it is not enough to offer a very attractive product from a premium brand. You also have to offer a competitive price position and good value for Chinese customers," he said.

 

At Beijing Asian Games Village Automobile Exchange, an imported 2.4-litre S40 sells for between 350,000 yuan (US$43,500) and 450,000 yuan (US$56,000).

 

Yale Zhang, a Shanghai-based analyst with US auto consultancy CSM Worldwide Corp, said the Volvo S40, competing in the entry luxury car segment, had potential in China.

 

"Volvo's safety concept has been well received by Chinese customers, and the entry luxury segment will boom in the foreseeable future as private customers will upgrade their vehicles from 2008," Zhang said.

 

"Young coastal professionals will pursue entry luxury cars for the driving experience and to distinguish their social status when most of the people in city start to own a car."

 

Volvo has been promoting its brand in China with the slogan, "Volvo for life".

 

The company also plans to introduce its all-new C70 convertible at the end of this year and all-new S80 within the next 12 months, both as imports to China, according to company executives.

 

Chang'an Ford, which will assemble the Volvo S40, now produces Ford Fiesta, Focus and Mondeo sedans as well as the new Mazda3 sedan. Mazda is also an affiliated brand of Ford.

 

Industry statistics showed that China's car market grew by 27 percent last year from 2004, to 3.1 million units.

 

(China Daily March 21, 2006)