“It will support us in realizing the aspirations to make China our second home market,” said Stefan Jacoby, the president and chief executive of Volvo.
Under the agreement, Zhejiang Geely will leverage its full access to technology authorized by the Swedish carmaker to develop a new premium brand for the Chinese market, said Yang Xueliang, a spokesman for Geely’s parent company.
“That would not compete with Volvo, which is a luxury brand,” he added. The Geely unit would benefit from the technology transfer in the future.
The companies also are exploring the joint development of electric and small cars, including plug-in vehicles, Geely said in a statement. Under Chinese rules, a Sino-foreign auto venture cannot produce only foreign car brands in China but must also set up research and development centers, then produce Chinese brand cars, an industry expert told Reuters.
Zhejiang Geely took over Volvo from Ford Motor Co. in August 2010, marking China’s largest overseas auto acquisition and reflecting the country’s rapid rise in the car world. The deal raised some eyebrows, especially in Volvo’s home country of Sweden, amid concern over the potential impact of Chinese ownership on a long-established upscale Volvo brand.
Li Shufu, the chairman of Geely Holding Group, has said Volvo’s independence would be maintained:
“Geely is Geely, Volvo is Volvo.”