No. 40 with rice, please

Nothing to do with Saab, yet.  And quite possibly nothing to do with Saab for some time due to incredibly low volumes, but an interesting development from the other Swede, nonetheless.

Import duties into China are so high, around 25%, that Volvo have decided it’s time to start making S40’s inside China itself.  Volvo have 45 sales outlets in China and sold 3,000 cars there last year, a number they’re hoping to boost with competitive, locally made S40’s.

"Local production is the key to remain competitive in China," said the chief executive of Volvo Cars, Fredrik Arp.

"We are facing a scenario where the import duty is levelling out on 25 percent and our main competitors are already producing their volume models locally."

The car will be built at a production plant in Chongqing, in the south west of the country, owned by Volvo’s partner in China, Changan Ford. The company is aiming to manufacture 10,000 cars a year there.

From The Local.

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4 Comments

  1. Volvos are already very popular among China’s elite, perhaps due in part to their not being made there yet, but I think it is more than that. IKEA has done a great job in China and it will be interesting to see how this quasi-Swedish company now does.

  2. If Volvo proves to be successful with this plan, no dout it will set the trend. We all should better watch it like many other commercial realities that will take Saab in the process !!!

  3. 25% import duties – LOL! This is precisely the reason that China has a huge trade surplus, and I can’t imagine why we all agree to play by these unfair rules.

    I wouldn’t invest in a Chinese plant if I owned such a business — the risk would keep me up nights. “How am I going to make a profit when I have to use a local company to filter revenues and I can’t take money out of the country?” “What recourse do I have if they seize the plant?” “What recourse do I have if they start making and selling knock-off Volvos to the rest of the world after they seize the plant?”

    All of these things are remarkably real and should be threatening to any company interested in Chinese development and investment. However, they continue.

    One anecdote: a multi-national company with a large local presence that happens to be in the electrical components business (switches, relays, simple controllers, small motors, etc.) was forced to sell their Chinese assets when times got tough. Not only did the Chinese plants never make money, the company waas forced to sell to their local ‘joint venture partner’ (it was the only company allowed to bid on the plant by Chinese government decree), but they, predictably, were offered a fraction of their joint venture value. Now their former partner is a competitor in several markets, going so far as to license new designs from a third competitor so that the Chinese company can now offer more than one technology.

    Any deal that’s not a two-way street is usually riddled with inequity.

  4. Very good points, eggsngrits. You know, our very own beloved GM is suing right now due to Chinese copying of a Daewoo design.

    GM had a deal with a Chinese company called “Chery”. Chery would build a Daewoo (a GM company) designed car in China and sell them there. A few years down the line Chery starts selling its OWN car that looks almost EXACTLY like the Daewoo. It’s so similar that the parts between the Daewoo and the Chery are interchangable! That can’t be good for business!

    http://www.chinadaily.com.cn/english/doc/2004-12/18/content_401235.htm

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