With Volvo, China eyes M&A abroad to win at home

Once Li Shufu, head of China's Zhejiang Geely Holding Group, closes the deal to buy Ford Motor's Volvo unit for up to $2 billion, the sedate, safety-conscious Swedish brand may be in the running to replace the Audi A6 as Chinese state officials' car of choice.

The 47-year-old son of a farmer, Li has been likened to Henry Ford for his ambition to build up a mass manufacturer of affordable cars.

He is already planning a factory in Beijing to make as many Volvos for China as are now made abroad for foreigners.

"Li Shufu has made a huge bet and the stakes are extremely high," said John Zeng, an analyst with IHS Global Insight, an industry consultancy.

"But he has a chance to win since he can count on the China market, rather than somewhere else, to turn Volvo around."

China last year sped past the United States to become the top auto market and a key source of business for both battered global titans and ambitious domestic neophytes, which are emerging from obscurity to try their hand at global acquisitions.

But despite a fast-growing home market and a deep-pocketed government keen on home-grown champions, the Chinese are likely to find much tougher going than their Japanese and Korean rivals in taking domestically developed cars to the global market.

And before finding success abroad, they still have a lot of catching up to do at home, and it is here, not in the U.S. or European markets, where foreign acquisitions may prove crucial.

STARTING AT HOME

Many Chinese automakers, from SAIC Motor Corp (600104.SS), its biggest, to rising stars Geely Automobile Holdings and BYD, have publicly expressed their aim of selling their own brands in the big developed markets of the West.