Volvo Aims to be First to Export Chinese Cars to U.S.

Volvo Car Group is poised to become the first major automaker to build cars in China for the U.S. market, underscoring the looming threat of Chinese imports to Detroit’s carmakers.

The Swedish automaker, acquired by Zhejiang Geely Holding Group Co. in 2010, plans to export the S60L midsized sedan made in Chengdu to the U.S. this year, Stefan Elfstroem, a company spokesman, said today in a telephone interview on the eve of the North American International Auto Show’s opening to the media in Detroit.

“It’s a baby step toward China being, from an auto industry standpoint, a truly global player -- not just a domestic dominating force -- in terms of volume,” said Jeff Schuster, an analyst with LMC Automotive in Troy, Michigan. “It is a test, though. Those vehicles will be under some scrutiny in terms of making sure that they hold up to quality here in the U.S. and global standards.”

The Chinese auto industry’s goal of following Japanese and Korean automakers to the U.S. has had many false starts.

In 2005, Chery Automobile Co., had plans to export cars to America by 2007 while Geely said at the Detroit auto show that it would be selling a compact car in 2008 in the U.S. for less than $10,000.

In 2007, Changfeng Motors executives said in Detroit that they too were looking for dealers to begin selling in the U.S. as soon as 2008.

None of those plans materialized.

International Product

“I don’t think they felt they had the product right and I don’t think they had the quality right,” John Wolkonowic, an independent automotive analyst in Boston, said. “They don’t want to repeat what the Koreans did with Hyundai the first year, what the Japanese did with Toyota in the first year -- they all had a bad experience. The Chinese are saying they don’t want to do that.”

Volvo has the best opportunity to export to the U.S. because “it’s more of an international product as opposed to a China product,” Wolkonowic said.

Chinese billionaire Li Shufu’s Geely bought Volvo from Ford Motor Co. in 2010. The Swedish automaker is changing its product range in the next five years while seeking to maintain its decades-long reputation for safety. Its main promotional focus at the moment is this year’s rollout of the XC90 sport-utility vehicle, Volvo’s first model wholly designed under Geely ownership.

Volvo Credibility

The brand, which has assembly plants in Sweden and Belgium, opened its first factory in Chengdu, China, in 2013. Volvo Cars Chief Executive Officer Hakan Samuelsson had signaled that the company could use spare capacity at the China facility for exports. Reuters earlier reported Volvo’s export plans for the U.S. this year.

China became the largest market last year for Volvo Cars with sales gaining 33 percent to 81,221 units.

Volvo is targeting a 67 percent increase in U.S. sales as it doubles its marketing spending and introduces new products, including the XC90 and V60 Cross Country wagon, as part of an effort to stem a decade-long sales decline. U.S. sales fell 7.9 percent last year to 56,366, according to researcher Autodata Corp.

“The Volvo name has a lot of credibility,” Tom Libby, an analyst with IHS Automotive, said. “There are not a lot of the questions that would surround it if there was a Chinese manufacturer’s name on it. The questions would be: Is this thing any good? Where do I get it serviced? Who’s the dealer? Those questions, frankly, don’t exist with Volvo. The fact that it’s assembled in China will be a minor thing.”

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE