HONG KONG (Reuters) -- Now that Geely Automotive has won the bidding to buy Volvo from Ford Motor Co., China's No. 1 private automaker is making plans to set up a local production base, according to sources familiar with the company.
An even bigger challenge might be convincing status-conscious Chinese consumers to buy a made-in-China Volvo.
China's car market is certainly an alluring prize. The country's auto sales surpassed those in the United States in 2009, and Beijing has said it would continue to encourage domestic consumers to buy new cars with subsidies.
China car sales are growing fast. Last week Geely rivals General Motors Co. and Volkswagen AG -- the leaders in China's car market -- reported their 2009 China sales leapt 67 and 37 percent, respectively.
Ford said Dec. 23 it expects to sign a deal to sell Volvo to Geely by the first quarter and close the deal in the second quarter.
When it acquires Volvo, Geely's first order of business is to work out where to produce its new vehicles. Sources familiar with Geely's future strategy for Volvo said that the company plans to cooperate with local city or provincial governments in China to build plants for Volvo cars tailored for Chinese consumers.
In China, Ford currently runs a car venture with Chongqing Changan Automobile Co, a domestic rival of Geely, to make Volvo S40 and S80 cars.
Locally-made S40s lose price premium
The S40s produced at the Changan plant in western Chinese city of Chongqing sell for around 250,000 yuan ($36,620), or about 50 percent cheaper than the imported made-in-Sweden model.
Geely is in talks with the Chongqing government to continue to make Volvo cars in the city, said the sources, who declined to be identified as they were not authorized to speak to the media.