Volvo's new Chinese owners now have a foot in the European market. They also have their eyes set on China’s growing middle class car buyers. In Germany, a world leader, the reactions have generally been favorable.
Geely bought Volvo for 1.8 billion dollars
The sale was done with Geely transferring 1.8 billion dollars to Ford. Geely Group chairman Li Shufu said it was a "historic day" for the company, which would invest 900 million dollars into improving the brand.
Geely has nominated the German Stefan Jacoby, the head of Volkswagen in America, as Volvo's new president and chief executive.
Ferdinand Dudenhoeffer, a car expert who teaches at Duisburg University, said that this was a good decision because Jacoby had been instrumental in helping Volkswagen expand in China, which has huge potential.
He explained that what was needed first of all was to set up "a manufacturing base in China if the company wants to expand. Secondly, it will have to become stronger in the American market. It will need stronger products and will then gradually make its way across the market but the road will be long. Volvo is struggling today compared to Mercedes and BMW."
Expanding in the luxury market will take time
Geely has also said it wants to expand in the luxury market but Dudenhoeffer warned that this would not happen overnight. "It will need a lot of effort and will mean more engineering. A lot needs to be integrated. Let’s see what the situation looks like in 10 years."
Volvo needs to sell 500,000 mid-range models to make its mark in China
He added that to compete with other manufacturers in the luxury sector, Volvo would first have to improve its sales in mid-range models and reach well beyond the 500,000 mark.
The big names in the luxury sector remain Mercedes and BMW, which are still in German hands.
Generally, the reaction in Germany to the takeover of Volvo by Geely has been rather subdued. Some traders said customers had no reason to be concerned.
"There’s been little negative reaction, of course people are always a bit skeptical at the beginning but if you put forward arguments they see it as a positive development, just as we do. We have very few negative feelings towards the takeover," one Volvo trader in Munich said.
Volvo will "remain true to its core values"
One of the arguments is that the cars are likely to become cheaper; another is that Volvo’s HQ and plants will remain in Europe and that management will retain its autonomy. Moreover, the new owners insist that Volvo, which is known for its family-friendly cars, "will remain true to its core values of safety, quality, environmental care and modern design."
Volvo is renowned for family-friendly cars with high safety standards
"It makes no difference for the model I have," one long-time Volvo driver said. "But I can imagine that in four or five years if we want to buy another car we might ask the question about quality standards. We’ll have to talk with people who know more but of course one can never be certain."
What is certain is that companies all over the world are scrambling to get their share of China’s booming car market.
Author: Anne Thomas
Editor: Thomas Baerthlein