Will Volvo need a JV in China with itself?

Western car makers wanting to operate in China need a joint venture with a Chinese partner. And it looks like Volvo is going to have to partner with itself to keep officials happy.

The Chinese authorities are keen to make sure that Western car makers can’t just rock up on their doorstep, open up a factory or three and flog cars in the most populous nation on earth.

Instead, China insists that any non-Chinese car maker wanting to operate a manufacturing facility in China has to do so with a Chinese company as partner. And it doesn’t just stop there.

The incoming car maker has to develop new models with its Chinese partner for the domestic market to sell alongside their own and share in R&D. So it’s not the easiest route to market for Western car makers, but one which China’s huge car market and punitive import tariffs for cars makes a necessity.

All of which, you would think, would give Volvo a real edge. In fact that edge was behind Volvo’s plan top be selling 200,000 Volvos a year in China by 2015 and taking a 20 per cent share of the luxury market. But there seems to be a bit of a snag.

China regards Volvo as a Swedish company even though it’s owned by Geely (interestingly, Sweden now treats Volvo as a foreign-owned company) and Volvo hasn’t received permission to build the factories it wants in Chian to start building Chinese Volvo.

Now it looks like Volvo going to have to have an official joint venture with itself in the form of a Volvo/Geely JV, with the funding for the JV coming from Volvo in Sweden to comply with Chinese requirements and a Geely range of cars developed in partnership with Volvo.

Well, at least the partnership agreement should be amicable and let Volvo get the new V40 being bolted together in China as soon as possible.