The National Development and Reform Commission, China’s main industry planner, has approved plans by Volvo Cars to start building vehicles in the Asian country, three people privy to the matter told Bloomberg News. According to the sources, the NDRC has recently approved Volvo’s production plan, which still needs final approval from the State Council, or cabinet.
One of the sources said that the chances of the plan being rejected by the State Council are negligible. Volvo has said it is planning to open its first manufacturing plant in Chengdu, Sichuan province.
The approval has been much anticipated by Li Shufu, chairman of Volvo parent Zhejiang Geely Holding Group Co. Li made a gamble that he would have an edge in China when he acquired Volvo from Ford Motor Co. in 2010, only to discover that the Chinese government also made Volvo undergo the same regulatory procedures as all foreign carmakers.
Jaguar Land Rover, which established a Chinese venture with Chery Automobile Co. in 2012, did not wait that long to gain approval to build cars in China.
The approval of Volvo’s production plan means that the Swedish carmaker could soon sell cars at lower prices as vehicles built in China are not subject to a 25-percent import duty. China Car Times published an earlier report saying that Volvo had gained the NDRC’s approval for local car production.
Volvo posted a 31-percent jump in sales in China to 8,719 units in the first two months of 2013, making the country surpass Sweden as its second-largest market next to the United States.
Li remarked earlier this month he was confident that Geely's sales growth would perform better than the Chinese auto industry, which is expected to grow by around 10 percent in 2013. The carmaker has set a target of selling around 200,000 vehicles in China by 2020 from 41,989 in 2012. Volvo plans to invest $11 billion globally by 2016, much of which will be spent in China.