Volvo Invests in Geely to deepen its Cooperation in China

China: The “V auto project”, a joint investment by Shanghai Volvo headquarter, Geely Hong Kong and Geely Holding Group has further moved ahead by establishment of its third base in the country in Luqiao, Taizhou in China. Volvo already has its manufacturing base at Daqing and Chengdu.

The construction of Taizhou base was started last year and will manufacture “L” series new brand models which will be based on the CMA platform, a joint production of Geely and Volvo. As soon as the base will get approved for the manufacturing of Volvo brand models, Volvo will start producing its vehicle and share the same production line with Geely. This is expected to enhance the collaboration between Geely and Volvo.

Volvo is planning to adopt a differentiated competition approach with opponents. With the CMA compact vehicle platform, Volvo is trying to meet the demand for Volvo’s need in compact vehicles to grab a larger share in the market. Therefore, Volvo has to cut costs and launch a competitive model in the market. The “L” series brands, are staged in front of joint-venture brands such as Volkswagen and Toyota. The sharing of manufacturing line based on CMA platform would enable the company to lower its production cost and diversify the brands at the same time.

TechSci Research is of the view that this move of Volvo’s straitening its cooperation with Geely is also going to increase the demand for tires from the OEM segment of China.

According to a recent report published by TechSci Research, “China Tyre Market Forecast and Opportunities, 2020’’, tire market in China is forecast to increase at over 11% CAGR during 2015-20. Increasing automobile sales, continuously expanding motor vehicle fleet, increasing exports, ongoing developments in road infrastructure coupled with innovations in tire technology are the major factors driving growth in tire market. Segment wise, passenger car tires remain the most dominant market segment followed by two-wheeler tire and commercial vehicle tire segment in that order.