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Chairman Li Shufu's Chinese Dream: Revival of Volvo Starts in Chengdu

Source:Globaltimes.cn Published: 2013-6-25 16:57:30

On June 5, a day before the opening of this year's Fortune Global Forum to be held in Chengdu, China, Li Shufu, Chairman of Geely Holding Group and Volvo Cars, in a high-profile appearance, led a senior executive team from Volvo headquarters located in Sweden to fully participate in the upcoming forum.  As an official partner of the 2013 Fortune Global Forum, Volvo provided a fleet of Volvo cars to the organization as courtesy cars for the global officials and business leaders.

After the acquisition of Volvo, Chairman Li Shufu attaches great importance to the future development path for Volvo and believes that a key point for Volvo's development is to edge itself into top tier of China's fast developing luxury car market.

As Volvo's first Chinese plant is about to start operation in Chengdu, Li Shufu could, to some extent, be regarded as one of the hosts of this year's Fortune Global Forum. In an interview arranged with National Business Daily at Shangri-La Hotel Chengdu during the afternoon of June 5, Chairman Li Shufu talked about his Chinese Dream and shared his new understanding as well as successful experience in auto industry.

With a new plant in Chengdu    Volvo embarks on a road to revival

With a smile on his face, Li Shufu walked into the press area. Under his leadership, Geely and Volvo have successively erected plants here in Chengdu and Li himself is a frequent visitor to this city. So, the interview started with his bond with Chengdu. 

In 2007, Geely established a factory in Chengdu's economic development zone and Chairman Li, after the acquisition of Volvo, also decided to choose Chengdu as the location for Volvo's first Chinese plant.

"What make you feel so confident about the city of Chengdu?" asked a reporter.

Li said, "The choice of Chengdu as a production base for Geely and location for Volvo's first plant in China is a response to our country's call to support and participate in China's development of western regions. The investment environment in Chengdu is fine and we believe that this city will bring exciting news for Geely and Volvo's development in China.  "

Volvo has achieved a promising start so far this year in China's high-end car market with a year-on-year increase of 27.5 percent during the first five months, making China overtake Sweden as the second largest market of Volvo only after America. It is also the fastest growing luxury car brand in China, well ahead of three German brands: Mercedes, BMW and Audi.  

However, cars for individual customers like XC60 and S60 contributed largely to the strong performance of overall sales while in the dominating C class luxury car section, S80L lags far behind Audi A6 and BMW 5 series.  

It is in order to boost this sector that Li Shufu purposely unveiled the brand new 2014 version of S80L before the opening of this year's Fortune Global Forum.

According to Li, Volvo base in Chengdu is currently busy preparing for the final completion. The infrastructure construction and team structure establishment have entered the final stage. The plant will soon start operation where the first domestically made S60L will be delivered.  

As for Chengdu base, Li said that the plant in Chengdu is the first such of Volvo outside Europe since 1969.  As a vital part of Volvo's "China Growth Strategy", the establishment of Chengdu plant marks a phase breakthrough for Volvo's domestic production development plan which will help increase both the popularity and market share in China's central and western regions and cement a frontier based on which to expand overseas market in such regions as ASEAN economic zone.

The realization of domestic production is an important part of Volvo's global business strategy and brand revival and will play a major role in its sales target of 800,000 units in 2020.

China's economic growth will gradually rely on domestic consumption which heralds more business opportunities for the sales of both domestic and foreign brands; however it does not guarantee a smooth path for foreign brands' entrance into Chinese market.

Answering the question raised by a reporter with National Business Daily that what should be done for Volvo to succeed in China, Li Shufu stressed that Volvo has found its right feelings and direction after several adjustments in the Chinese market. So Volvo's sales this year in the Chinese market will turn out to be more satisfying.

Related statistics indicated a mere 8.34 percent growth for China's luxury car market in the first quarter and the outstanding performance contrasts sharply to this sluggish sector.

Brimming with confidence, Li continued, "This is just a beginning. We will step up the domestication process and enter a rapid development stage by launching six products and meanwhile we will make more efforts in the construction of distribution channels and tap into the third and fourth tier cities." Besides S60, more cars will be produced when the newly built plant in Chengdu go into operation.

Strategic transformation   Geely is fighting five battles

In July, 2012, Geely Holding Group for the first time made into the Fortune Global 500 and was ranked number 475 increasing from 688 in 2011 with revenues of $23.36 billion and number 31 among all car enterprises. Chairman Li Shufu entered the auto industry just 16 years ago but has created a Chinese miracle in a global auto industry boasting a history of nearly a century.

"What do you think is your successful experience?" asked a reporter with National Business Daily. Li noted that the successful experience of Geely's development is its dedication to manufacturing, innovation and training talented personnel. 

Li stressed that Geely has abandoned the traditional price battle since the strategic transformation in May, 2007. He said, "We can not simply fight a price battle. Instead we should fight five battles: technology battle, quality battle, brand battle, service battle and culture battle and these are what we are currently doing."

He told the press that Geely has seen remarkable results after the strategic transformation. "We have seen more profit and sales year after year. Product quality and technology are growing better and better. "

Li Shufu told the press that Geely and Volvo have stepped up bilateral cooperation since the acquisition. On March 9, 2012, Geely and Volvo inked a technology transfer agreement to jointly develop small-displacement, high-performance and green engines, small green cars platform and explore the integration system technology for new energy vehicles such as electric, hybrid and plug-in cars.

In November, 2012, Geely and Volvo signed a technology consultation agreement, according to which, both parties will conduct cooperation in three areas of GMC platform, in-car air-filtering-and-control technology and security system of GX7. "We set up a R&D center in Gothenburg, Sweden in February, 2013, and we believe that this new R&D center which is affiliated to our holding group and a rather independent one enables us to fully realize the knowledge and technology sharing without affecting each other's brand reputation and product development. Volvo will continue to focus its eyes on high-end car market while Geely will still dedicate itself primarily to the mass-market cars. "

"Cars are products which could mean life and death to people. It is rather dangerous to simply pursue a high profit." Li Shufu said quite frankly.

However, according to some industry insiders, a series of price cuts introduced by some foreign and joint-venture brands could bring challenges to home-grown brands. In response, Li said, "Opportunities outweigh challenges for China's home-grown car brands. It is wrong to assume that home-grown car brands will surely face crisis when foreign cars lower their prices and develop cars similar to these of our home-grown brands. For Geely, we will continue to lay a solid foundation, improve ourselves, boost our comprehensive competitiveness as an enterprise and better combine our long, medium and short term targets to promote better development."

A growing Geely aims to be international

A growing Geely has witnessed a number of mergers and acquisitions. In 2006, Geely became a shareholder of Manganese Bronze Holdings in Britain. In June, 2009, Australia's Drivetrain Systems International (DSI) with a history of more than 80 years was bought by Geely. In March, 2010, Geely purchased all shares of Sweden car maker Volvo with 1.8 billion US dollars. In February, 2013, Manganese Bronze Holdings was wholly-owned by Geely.

Is M&A a shortcut for Geely? Li Shufu told the press that overseas mergers and acquisition are not the only way for a self-owned auto enterprise to develop itself.

He said, "How to achieve technological innovation is also the key to an enterprise. When participating in the market competition an enterprise should own a right strategy of its own and constantly find opportunities which conform to its strategy. Geely will in no way give up any possible M&A opportunities; however, we will definitely not blindly get involved in any unnecessary project during our process of exploration and practice, which is an indispensable quality for any enterprise. "

Meanwhile, recent years have seen a slow growth of Geely's exports. Li said that Geely has long ago tapped into markets of Europe and America. Geely has for many years provided London with its taxi cabs, but the number is not high enough, only several thousands a year. It is going to take some time to march into the European market or American market on a large scale."

As far as Geely is concerned, Li holds that it should first better serve the Chinese market. He said, "Geely is a Chinese domestic car brand. What we need to do is gain a strong footing in our Chinese market before exploring the other key markets in a step by step manner. Our dream is to make Geely a global car brand, but it surely takes some time. "

Li Shufu noted that Chinese self-owned brands should gain recognition among the developed markets in terms of innovation capabilities, R&D, market distribution, marketing approaches and brand images before becoming a leading character on an international stage and a challenger and competitor in the international mainstream markets. 

He stressed that the mission of Geely is to conquer the concerned markets of developing countries first. And then it will be possible to grab a share in the developed markets of Europe and America.

"Of course we cherish this hope. It is my version of Chinese Dream to make it a reality in the future." Li said frankly.

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