Companies

Volvo expects China's building to rev profit

By Chen Limin (China Daily)
Updated: 2011-06-10 14:16

BEIJING / GOTHENBURG, Sweden - The Swedish construction equipment maker Volvo Group expects China to be among its top three revenue contributors in the coming three to five years, according to a company official.

"Asia is now the second-largest market for Volvo Group, thanks to the rapid expansion of the Chinese and Indian markets," said Lansi Jiang, vice-president of Volvo (China) Investment Co Ltd.

She said China contributed only 1 percent of the total revenue of Volvo Group in 2006, but the proportion rose to 7 percent in 2009, making the country one of the Swedish company's top-five revenue contributors.

Construction equipment manufacturing in China is a major business of Volvo Group - whose products also include trucks and buses - accounting for more than 80 percent of its revenue in the country.

China's construction industry has thrived in recent years due to the government stimulus package, rapid urbanization and strong economic growth. This has stimulated the sales of construction equipment.

According to a report by Global Construction Perspectives and Oxford Economics in March, China surpassed the United States in 2010 as the world's largest construction market, boosted by the government's stimulus spending.

"Construction has never seen such rapid growth above GDP, fuelled by the emerging superpowers of China and India and a rebound in US construction", said Graham Robinson, director of Global Construction Perspectives and an author of the report.

The report predicted that China's construction market will more than double over the decade to $2.5 trillion by 2020, accounting for 21 percent of the world's total construction.

Growth in China, India and the US will account for more than half of the predicted $4.8 trillion increase in global construction to 2020, according to the report.

Construction equipment will be the largest part of Volvo Group's business in China with steady growth, Jiang said.

The company said last year that it will set up a $30 million Volvo Technology Center in Jinan, Shandong province, and invest $50 million to expand its joint venture factory in Linyi, also in Shandong province, by the end of 2012. Both investments are related to the construction equipment business.

But Jiang said that the company hoped to boost growth of its truck business, which accounts for 68 percent of Volvo Group's business globally but only a small proportion in China.

It is talking with a number of Chinese universities to increase cooperation in research and development, and it wants to employ more people in China, said Peter Karlsten, chief technology officer of Volvo Group, at the Volvo Group Tech Show 2011 in Sweden in late May.