Volvo Car Corp. is expected to report a huge operating loss in China for 2012 due to weak sales as well as an expensive new plant, according to report by Swedish daily Svenska Dagbladet citing sources. The daily reported that Volvo will post operating losses of between SEK2 billion to SEK4 billion ($308 million to $615 million) in China.
The paper reported that Volvo’s operating earnings in China was heavily hit by the high costs connected to its nearly finished new plant in the Chengdu, China. The carmaker’s operating losses are also attributed to expenses connected to its building up a network of Chinese dealers as well as weak overall sales in the country.
The carmaker’s operating losses in China are highly expected as Volvo succumbed to an 11-percent drop in sales in 2012 and it has been investing heavily to establish its first local production in the country. Volvo has been busy implementing cost reductions and job cuts as it continues to suffer from the current economic crisis in Europe.
In the first half of 2012, Volvo posted SEK239 million ($35.6 million) in earnings before interest and tax, a deep plunge from the SEK1.53 billion operating profit in the same period in 2011. Volvo posted SEK254 million in net losses in the first half of 2012. Volvo has been wholly owned by China's Zhejiang Geely Holding Group Co. since 2010.