On Volvo and the Chinese…

This may seem to be a bit off topic but on a closer look it is not. Last week we could read that Volvo is considered a foreign automaker in China despite Geely ownership. This of course draws them into a few problems when it comes to local production. They are forced to get into a joint venture with a Chinese company and have to fulfill certain obligations just like any other foreign automaker. It won’t stop them but it takes time.

I’d dare to paint the same picture if Youngman should become owner of Saab. And this is why the article is relevant for us in a way, too. There is no quick way to local production in China. If this is good because it will force them to produce in Sweden or if this is bad because it may encourage them to bring all the pieces to China and be a real local company – I’ll leave that to you.

From autonewschina.com

3 reasons why Volvo will suffer for its foreign status in China
Yang Jian | 2012/2/24

SHANGHAI — Despite Volvo Car Corp.’s Chinese ownership, the central government views the automaker as a foreign entity, Volvo Chairman Li Shufu admitted last week.

That’s very bad news for Li and for Volvo, which was acquired 19 months ago by Zhejiang Geely Holding Group Co. Li also is Geely’s chairman.

Volvo will suffer for its foreign status for three reasons. (See related story in newsletter)

First, China’s government spends billions of dollars each year on vehicle procurement. After acquiring Volvo, Li lobbied Beijing to include Volvo in the government’s procurement program.

But with Volvo considered a foreign automaker, government agencies are less likely to procure their vehicles from the company.

Second, if Volvo is treated as a foreign company, government permission to produce vehicles in China will be delayed.

Li wants to sell a lot of Volvo cars in China to help revive the brand. But the cars must be built in China to avoid hefty import duties.

Volvo — like any foreign automaker — will have to form a joint venture with a Chinese company, create a separate brand for the partnership and produce electric vehicles in China.

Volvo intends to form a joint venture with Geely. But this takes time, and it will delay Volvo’s plans to build vehicles in China.

Third, with Volvo considered a foreign company, the automaker’s image will suffer.

Li sees Volvo as a luxury brand. Since Geely acquired Volvo, he has made every effort to keep the two brands apart for fear that Volvo’s association with Geely, which makes inexpensive cars, will tarnish the Swedish brand.

But now his effort to protect the Volvo brand is doomed. To produce Volvo cars in China, he must comply with government regulations by setting up a joint venture between Volvo and Geely.

Vehicles to be built by the joint venture would carry a Geely Volvo badge, which is not something Li wants to see.

The Volvo acquisition established Geely as a global player. Proud of this achievement, Li must have lobbied the Chinese government hard to let the brand produce in China on its own.

But obviously, he failed. In a global age, insular Chinese government officials insist that an international brand owned by a domestic company is still foreign.

What an irony! But Li must grin and bear it.

All Li can do is hope for quick government approval of a Geely-Volvo joint venture so that he can produce Volvo cars in China as soon as possible.

Yang Jian is managing editor of Automotive News China.

44 thoughts on “On Volvo and the Chinese…”

    • Agree!

      I’m sure BMW will continue to develop and build cars in Trollhättan. The engineering department of Saab will of course be part of BMW’s department and co-develop parts that can be shared in the same way they did with Opel BUT with a good relationship not trying to back stab each other.

      • If the Munich thing would become a reality and Saab ends up as an other subdivision I would rase hell if they’d applied the same tactics to THN that GM did in their fear of real competition.
        No more decontenting, engine or model restrictions ever again!

        That’s why I like the thought of real independence. If an ”European premium car manufacturer” would allow Saab-Saabs to made, I’m all in.
        It would be funny to hear people say how Saab is just a dressed up BMW with FWD 😉

    • Also (and this may be silly of me) but I think BMW and Saab being European cousins and both having to face a rough climate in EU right now would aid their willingness to get the job done. I mean if China or India buys Saab, yeah they’re going to be a company again, but it’d be all about profit for the owner. I think with BMW and Saab combined it’d be a sense of local pride and heritage as well, not wanting that heritage to fade into the background.

  1. Bavarian Motor Works will do the right thing by SAAB, unlike gm.
    The purchase by BMW of the SAAB brand name, technology, production facilities, etc.seems to be perfect fit for both companies. Something to rival VW, bless their hearts.

    • And here we are again… praying to compete with VW, the second league. It’s like being playing in the NBA for more than 60 years and now desperately trying to get in ABA.

      • VW also owns a garage full of luxury carmakers — AUDI, Lamborghini, Bentley, and Bugatti. Late in 2009 VW acquired a 49.9% stake in Porsche for about E4 billion (almost $6 billion). I would not call this second league.

      • Your thinking killed Saab in many markets. They were positioned and priced too high. I would have no problem seeing Saab competing with VW (or Opel for example) – they are considered semi-premium in many countries already.

        I would prefer to be able to buy a well built and enjoyable but reasonably priced Saab made for enthusiast and families than not be able to afford a premium one.

        • It was not this thinking that killed SAAB. It was the lack of good advertisement. And If I had something to say, I would put Vectors with Linear price tags, and Aeros like Vectors and fully loaded. Although I know that SAABs came with more standard features than the competition.

          • Dave you are spot on. Audi is Saabs competition. Not Volkswagen. I own both, and trust me they are worlds away. I can’t imagine Saab running itself down to Jetta levels. That means no xwd, iqon, exwd, epower, no technology period will be at a reasonable price, and if it is , best believe that plastic interior is here to stay. Saab people just expect something for nothing. If that’s what you want, then buy a Volkswagen. Like I said, i have both and can honestly say, Volkswagen ownership is a nightmare, and they drive poorly for the price, all in the name of affordability (and don’t get me started on the repair costs because they use the worst suppliers). Good luck to mahindra and brightwell.

        • They could easily do both.
          I think Saabs were difficult to price attractively thanks to the limited engine range and too long model cycles as people always tend initially to look at a) starting price b) something that appears modern and c) what’s the hi-end offerings (which establishes image).

          A base 9-2 and 9-3 1.6 Turbo FWD would wipe the floors with VW and on the other hand the a big twin turbo’s with ice block dashes and all the necessary interior wow stuff would compete handsomely in the high-power/luxury segment. Just like the 900 and 9000 T’s ones did.

          • However great a car the 9000 T was (and is; I drive one with infinite pleasure), it unfortunately wasn’t seriously competitive in the luxury segment. Nor was it really intended to, it just had to. The development and building costs were so high that the cars had to be priced in the same market as the S Class and the 7-Series. And they just couldn’t compete with those, the 9000 with its 4 cylinders and rather vulnerable automatic gearboxes was simply a notch under those class leaders. The addition of a 3.0 litre V6 arrived too late and a diesel-powered version never even materialized.

            The relative lack of 9000 sales success and the associated operational losses were the main reasons that the Wallenbergs decided to sell and GM could buy Saab, first 50% of the shares and later the rest.

            So I think that whoever buys Saab, they need to position the various Saab models realistically, which is against brands and cars they have a real chance to outperform, outclass and outsell, not against cars which the whole world -bar a few optimists on this blog- perceives as truly premium.


            • Ivo, the point is the 900 and 9000 were considered performance/luxury vehicles at the time when a M5 came with 250 hp in the US.
              Hadn’t GM killed Saab’s V8 project immediately after becoming a part owner I’m sure customers would have seen Hi-Po Saabs -and demanded them- for the past twenty years at the same time keeping up with the A and B on the performance front.
              I keep hearing all the time how respected a 9000 T was all over the world.
              The car itself, as I’m sure you agree, can handle much more than 200 hp. Maptun puts in up to 470 hp even today.


              • I’ll agree with you on the 9000 being respected globally as a very, very good, well-performing car with a lot of character. Not so much on the classic 900 but that is, of course, a question of how you look at things. But I maintain that, if an S-Class Merc or a 7-Series BMW is considered the epitome of a serially built toppremium/luxury car class, the 9000 didn’t attain more status than perhaps ‘luxury light’. Nor because of what it was and offered to its owner, that was one he!! of a package once you drove it. But simply because of what it was not and did not offer: at least 6 cylinders and the status that goes with that.

                I was around -professionally- when the 9000 was introduced and also during the model’s career up to and until the end in 1998. I didn’t really see many, if any, S-Class or 7-Series drivers switch to the 9000 over the years. I did, however, see quite a few E-class and 5-series drivers with an individualistic and intellectualistic self-perception do the switch. So maybe that’s where the Saab 9000 (or a present-day equivalent of it) should have been (respectively be) pitted against: the premium segment. And perhaps have been (resp. be) somewhat more competitively priced to make up for the loss of brand awareness and perception Saab has suffered over the last several years. If the new owner perseveres in believing that a NG9-5, however great a car it is, should be competing against the entrenched top premium/luxury models then that will imho mean the end of Saab as we know and love it. Spyker tried that. And failed, more is the pity.


                • Yes sorry, should have been more clear about the term ‘luxury’ as I find it funny how Americans call everything above 40k USD just that.
                  To me luxury begins at 100.000 euro and I don’t want Saab to go there, but stay competitive against the 5-series and the A6’s.

                  The next 9-3/900 (if there’ll ever be one) IMO must hold its own against the smaller M’s and S’s or it will struggle like the current one in terms of image and sales.

                  • Then we are in agreement as I’m just as European as you are.

                    An NG9-5, whether it remains on sale as the current model or gets newly developed, should be on a par with the E-Class, 5-Series et al in terms of what is being offered in comparison but should be priced somewhat below those. In other words, the buyer gets at least the same but for less money. That price bracket would also make it competitive with the Acura’s, Passat CC’s and the like on the basis of plain old-fashioned value for money. Or, again in other words, the buyer gets more for the same kind of money.


        • KoGa – VW and Opel are volume brands. Saab is not. It would be foolish to try and compete with volume makers, simply because it would be impossible to get profitable. They have economies of scale that Saab can only dream about.

          Saab need to be positioned – and priced – more exclusively that the common volume brands in order to survive, no matter who the new owner will be.

          • Great marketing, and moderately competitive pricing in a semi/entry level luxury market is key. With the right advertising I think Saab could move 100,000 units a year while being profitable, as long as they keep an air of exclusivity about them. If you included production stats like Saab hand assembles 75% less cars in one year than BMW makes 3 series, that will move units. Apple still sells Mac Pros (desktops, not laptops) to professionals on the basis that they’re exclusive and robust.

            I’ve told my friends before that my car was hand assembled by Swedish workers from parts from Norway, Germany, Sweden, and Italy. When I put it like that the “Saab story” rumours are replaced with “oohs” and “aahs”. The craftsmanship itself makes it exclusive and something to be proud of.

  2. We need a new owner of Saab who can take independent business decisions without being held hostage by any governments or other third parties. We have all seen during the last year how difficult it is to do business if various third parties have to approve every move.

    For that simple reason I don’t want Youngman as the new owner of Saab, regardless how noble their intentions may be.

  3. if the BMW thing is a rumour or it will not be a winner, than Youngman – Saab would be in the same situation, wouldn’t be ?

  4. The best outcome for Saab would definitely be BMW, allowed by Mahindra. I’m don’t like bright well, as they seem like the next Spyker to me.

    Youngman? I’d feel bad for them if they didn’t get Saab. They seem like they know what they’re doing, and they’ve been wanting for so long to get Saab. They’d be losing money if they didn’t get them. I’d be happy for Youngman if they get Saab, but VERY of them and their motives. Good luck to them, but they have some good contenders to go up against, probably a good thing.

  5. The Chinese are overrated. Everything is aimed at knowledge transfer. The only reason they regard Volvo as foreign, is because they are trying to get production moved to China. This means skills and production know how. Gradually Volvo Sweden will be eroded.

  6. So… not only is China okay with taking IP from other companies then benefiting from all the production without any R&D, but they’re silly enough to think Volvo is going to tarnish their countries cheap car heritage. Mind boggling.

  7. Did you notice most of the posts on the story, completely avoid the topic, which was China? Talking mainly about, BMW as if the story was about BMW? Why do you think Swade and GM agree on one thing? Not doing the Youngman deal. Can you say hidden traiffs, no copyright protection,and no real free trade?

    Lets hope for BMW, and be happy with M and M, or Brightman, but let’s take off the rose colored glasses about China.

    • I actually tended to think just like you do. But the continued total silence from Munich now makes me reconsider a bit. If they really aren’t involved, they would have said so by now, wouldn’t they? They have nothing to win by keeping the rumor of their involvement alive and nothing to lose by simply denying that they are interested. Unless they are, of course.


    • Believe you are right 🙁
      The European manufacturer bidding for Saab is of course Volvo ( Yes I know the are not European owned, but they are still considered being European, no?)
      Hopes for M&M

  8. Ivo: or nobody at BMW in charge for denials has even recognised our small rumors in our small community.

    I, for one, will only believe it if BMW _confirms_.

    • Well, small rumors in our small communty here have found their way to globally read and respected media before so I guess BMW ‘Neinsager’ are bound to have read something somewhere. As you do, I will only believei it when I see it confirmed but, until they do, ain’t dreaming great?


  9. The Saab sale saga is probably more perplexed than we think!

    According to the following article published on the “Automotive News China”, (http://www.autonewschina.com/en/article.asp?id=8188), citing a source with knowledge of the situation, the receivers want bids for parts of Saab rather than the whole business to raise more funds for creditors.
    This is NO GOOD NEWS for Saab brand rebirth (contrary to what has been claimed so far here on the SU blog). This is what GM probably wants to get out of the bankrupt Saab.

    On another article (http://www.autonewschina.com/en/article.asp?id=8154), Pang Da owes consultants $8M for an unsuccessful Saab bid. Pang Da already has paid dearly for its abortive bid for Saab. The 45 million euros (376.7 million yuan) it advanced in September to buy Saab vehicles was largely wiped out after Saab was declared bankrupt in December.

    On another article (http://www.autonewschina.com/en/article.asp?id=8003) in September 2011, Youngman signed a 70 million euro technology licensing agreement with Saab owner Swedish Automobile N.V. to use the Phoenix architecture. Youngman has obtained Saab’s Phoenix architecture planning to develop new models in Sweden and China. However, it is not clear whether the bankruptcy court has the authority to rule on the transfer of Phoenix assets to Youngman.

    I can’t see where BMW fits in all these!

    • How wouldn’t BMW fit into this if they didn’t want to? Chinese involvement doesn’t necessarily equate BMW not wanting to take on another brand.

      If BMW truly wanted Saab, they could probably have Saab. Of course all of this is based off speculations and rumors, but that doesn’t necessarily mean the Germans couldn’t or wouldn’t be willing to throw down a check. Since all of the bidders are not completely known at this point it can’t be said they do or don’t fit into any of this. Time will tell.

    • That the receivers asked the bidders to put a pricetag on individual parts is old news. YM was told early January.

      IMO it makes it easier to make sure that they get a fair price. And it will make it more difficult for someone to acquire the whole thing for a cheap price and then earn big bucks by selling the juicy pieces themselves…

      Bankruptcy turns out to be quite a process. Just like we feared a year ago when this was proposed as a “solution”. Things would be so much better if Phoenix was closer to launch date. A little help a year ago could have made this situation a whole lot easier!

Comments are closed.

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.