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Volvo Cars Targets BMW With China Premium-Market Growth

Volvo Car Group is working to upgrade the model line-up with the aim of winning Chinese customers away from luxury-vehicle market leaders Bayerische Motoren Werke AG and Audi AG.

“We’re presuming a premium strategy, as we only have a future as a high-price car producer,” Chief Executive Officer Hakan Samuelsson said yesterday in a phone interview from Volvo Cars’ headquarters in Gothenburg, Sweden. Growth in the Chinese market will be helped as the carmaker, owned by Hangzhou-based Zhejiang Geely Holding Group Co., adds three factories in the country this year and next, he said.

Volvo Cars has been struggling to restore earnings since Geely bought the manufacturer from Ford Motor Co. in 2010 for $1.8 billion. The company forecast yesterday that it will break even at an operating level in 2013, equivalent to last year’s earnings before interest and taxes of 18 million kronor ($2.7 million), as new models attract buyers, making up for a first-half loss stemming from declines in sales and pricing, increases in investment spending and currency effects.

The break-even goal “is a very challenging and tough, but realistic, target,” Samuelsson said. Volvo Cars achieved about 60 percent of a 1.5 billion-krona cost-saving program in the first six months, he said.

First-half revenue fell 14 percent from a year earlier to 56.4 billion kronor as car sales declined 5.5 percent to 209,118 vehicles, Volvo Cars said yesterday in a statement. The operating loss was 577 million kronor, versus Ebit in the 2012 period of 349 million kronor, while the net loss widened to 778 million kronor from 274 million kronor.

Deliveries will probably grow in 2014 after remaining about unchanged this year from the 421,951 vehicles sold in 2012, the CEO said. Increases will be propelled by demand in China, where Volvo Cars’ eight-month volume surged 40 percent, with gains accelerating in July and August, he said.

The company doesn’t need financing from its parent, while it’s considering a bond sale to cover investments such as a new vehicle design, dubbed scalable product architecture, Samuelsson said.

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