Volvo looks to China for change in fortunes

It is seeking to take on larger global luxury brands such as BMW, Daimler’s Mercedes and Volkswagen’s Audi and win a market share big enough to foot the bill for the vast investments needed to develop new vehicles.

The operating loss at Volvo, wholly owned by China’s Zhejiang Geely Holding Group was 577 million Swedish crowns (£55.8m) for the first half of the year, compared with a 349 million profit in the same period last year.

But Volvo CEO Hakan Samuelsson said the company had “realistic possibilities” to break even this year, forecasting higher volumes and margins for the group in the second half.

“Growth is expected in China, whereas the European market is expected to continue to be challenging,” Samuelsson said, adding the Sweden-based firm was implementing a cost-cutting programme.

He said Volvo aimed to sell more than 50,000 cars in China this year against just under 42,000 in 2012.

“In the US, sales are expected to remain at similar levels to last year due to a highly competitive environment,” he said.

After a dismal 2012, sales of Volvo models such as the S60 and XC60 have only lately begun picking up and remain a far cry from a targeted 800,000 cars in 2020, a figure which would imply sales nearly doubling in coming years.

To accommodate that targeted rise in sales, Volvo is gearing up for production at several plants in China over the coming quarters.