Volvo Cars, the Swedish carmaker owned by Zhejiang Geely Holding Group Co. (GEELZ), won the approval of China’s main industry planner to begin making vehicles in the country, three people familiar with the matter said.
The National Development and Reform Commission recently authorized Volvo’s production plan, the people said, asking not to be named because the process is confidential. The State Council, or cabinet, has to give final approval, though chances of rejection are negligible, said one of the people.
The approval is a long-awaited step for Geely Chairman Li Shufu, who bet he’d have an edge in his home country when he bought Volvo in 2010, only to find the Chinese government subjected the Swedish brand to the same regulatory procedures as all foreign automakers. Even Tata Motors Ltd (TTMT).’s Jaguar Land Rover, which set up a Chinese venture with Chery Automobile Co. last year, took less time in gaining permission to manufacture cars in the country.
Still, the authorization paves the way for Li’s Geely to offer Volvo cars at cheaper prices because vehicles produced in China aren’t subject to the nation’s 25 percent import duty. The government requires overseas automakers to work with Chinese companies in making cars.
Two calls to the NDRC’s media office in Beijing weren’t answered. Zhejiang Geely spokesman Victor Yang declined to comment on an earlier China Car Times report, which said Volvo received NDRC approval to build cars in the country.
Volvo’s sales in China rose 31 percent to 8,719 units in the first two months of the year, surpassing Sweden to become the carmaker’s second-largest market, behind only the U.S. Li said earlier this month he was confident Geely’s sales growth would outperform that of the Chinese auto industry, which may expand about 10 percent this year.
Volvo currently sells seven models in China, ranging from 249,900 yuan ($40,200) for the C30 to 661,000 yuan for the C70 sedan, according to its website.
The automaker has said it is targeting to open its first Chinese manufacturing plant in Chengdu, capital of southwestern Sichuan province.
Volvo last month appointed Lars Danielson, who was in charge of establishing the Chengdu plant, as senior vice president for China operations. He replaced Freeman Shen, who held the position since October 2010.
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