The Swedish carmaker Volvo said Monday that it would start selling locally
made S40 luxury sedans in China.
Ford Motor's joint venture in China will produce 10,000 units of the S40
sedans a year from Changan Ford's plant in the western city of Chongqing, said
Frederik Arp, president and chief executive of Volvo Cars.
Volvo will start selling the S40 sedan this summer, which is from June to
August in China.
"Local production is the key to remain competitive in China," Arp said at a
press conference. The company is facing a situation where its "main competitors
are already producing their volume models locally."
Rising incomes in China have generated an increasing number of buyers for
premium cars. Car sales in China rose 21 percent in 2005 to 3.97 million units
and could grow 17 percent this year, according to the China Association of
Automobile Manufacturers.
So far, Volvo has imported cars into China. Last year, it sold 4,786 units,
an 84 percent increase over 2004. Sales of the S40 accounted for nearly a third
of the total.
Bayerische Motoren Werke said sales of cars made in China rose 77 percent to
15,300 units last year, compared with a 9.9 percent sales gain worldwide. BMW,
which set up its China venture in 2003, makes five models at its venture in the
northeastern city of Shenyang.
DaimlerChrysler's venture in China, which started to sell locally made Benz
sedans in December, increased sales of imported Benz cars by 39 percent to
16,128 units last year. The company is making two E-class models at its venture
in Beijing. Chrysler Group plans to start making 300C sedans this year.
The decision to start local manufacturing was made because of "the
significant growth of the overall market combined with the fact that the lion's
share of the growth is happening from local manufacturers," Arp said. "So being
an importer only is not necessarily a long term success situation."
Depending on the demand, the output for the S40 from the Chongqing plant may
rise, Arp said, without giving details. The sedan accounted for nearly a fifth
of Volvo's global sales last year.
"It's a great advantage not to have to invest in all the facilities in a
joint venture," Per Norinder, Volvo Cars' general manager in China said.
"Changan Ford already has a factory up and running."
A locally made Honda Civic
Honda Motor plans to sell locally made Civic compact cars in China.
The company, which produces the Civic in 12 countries, said it planned to
sell 50,000 Civic units in China this year.
"Civic is more important for Honda in China than its other models like
Accord, as the popular compact car model is more attractive to consumers with
its cheaper price and fuel efficiency," said Yale Zhang, an analyst with CSM
Asia in Shanghai.