Volvo Cars CEO Hakan Samuelsson has made an explicit offer to his Chinese parent company. In an interview with Automobilwoche, Samuelsson said it would be “positive and possible” for Geely’s sibling brands to produce vehicles at Volvo’s European factories, including the Ghent, Belgium, plant.
Samuelsson’s offer is a direct invitation for Geely Auto (the brand, not the group that owns Volvo), Zeekr, and Lynk & Co to skip the expense and delay of building their own European assembly plants and use the capacity Volvo already has.
Handy way out
“They would have a much shorter and lower-cost journey to enter Europe,” Samuelsson said to ANE. “They realize that if they want to be serious in Europe, it’s not just exporting. They need a localization strategy. They should talk with Volvo and see if they can utilize the capacity we already have.”
As a result of the EU tariffs, Chinese automakers are on moving forward with plans to establish European production. Stricter EU investment screening rules could take effect, too, but local production offers a handy way out. BYD is preparing its Hungary plant. MG Motor will assemble in Galicia, Spain. Chery is slated to use Nissan’s UK factory.
Jump of 300 percent
Geely itself is reportedly negotiating to buy an assembly hall from Ford in Valencia, Spain. It would make more sense if the sister brand to Volvo chose the group’s infrastructure rather than shopping at the competition.
But the Spanish government is on a path to reinvigorate its car industry by wooing the Chinese brands and decision-makers. And platform architecture plays a major role.
Geely’s sibling brands alone have sold nearly 14,000 vehicles in Europe so far this year, a jump of more than 300 percent from the 3,167 sold in the same period last year.
Local production would spare Geely brands the EU’s 18.8 percent tariff on Chinese-built battery-electric vehicles, in addition on the standard 10 percent import duty.
Cost problem
Samuelsson specifically mentioned Volvo’s Belgian factory as a candidate, but with a caveat. Ghent only works if Volvo can improve its competitiveness.
“That’s something we are working on together with the Belgian government,” he said, referring to efforts to bring down labor and energy costs. “A lot of things need to be improved.”
That comment lands just weeks after Flanders put a €119 million subsidy package on the table to keep the plant viable. The message from Gothenburg is clear: government support is welcome, but it does not solve the underlying cost problem. Subsidies only travel a certain distance. In the past, these could not prevent closures at Ford Genk or Opel in Antwerp.
Volvo has a severe overcapacity problem. With the new plant in Kosice, Slovakia, scheduled to open next year with newer equipment and lower operating costs, total capacity will be 800,000.
The brand only sold 380,000 vehicles in Europe last year. Geely vehicles built on the EX30 SAE platform would have the best chance of landing at the Ghent factory.
70 percent local production
Allowing Geely brands to fill the gap would keep the Ghent lines running without requiring Volvo’s own sales to grow overnight. At least, Geely Auto Group has aggressive plans. It forecasts 750,000 sales outside China this year, up from a previous target of 640,000. The 2027 goal is 1 million combined overseas sales for Zeekr, Lynk & Co., and Geely.
Victor Yang, senior vice president at Geely Holding, said the group aims to achieve 5 percent market share in each major region by 2030. To hit its targets, Geely Auto Group expects almost 70 percent of the annual sales to be locally assembled. Yang explicitly named Volvo as the European production partner.
The deal, if it happens, would be a transactional one. Geely brands get a European foothold without building factories. Volvo gets help covering the cost of its expensive European production network. And Ghent gets a reason to keep its gate open.
