Geely capturing Volvo S60 project from Changan Auto

Zhejiang Geely Holding Group is now busy capturing Volvo model resources in China after the Chinese company lately obtained the approval from European regulators upon the acquisition of Volvo, said sources.

Chang'an Ford Mazda Automobile Co., Ltd., a joint venture among China's Chang'an Automobile Group, US Ford Motor, and Japan-based Mazda, once set up a team so that the Volvo S60 could be made in China, according to a source close to the venture.

Currently, however, the source said that the S60 project was ceased and that the team withdrew from the project. Industry insiders stressed that Chang'an Automobile and Volvo earlier signed an agreement upon the production of the S60.

If Geely wants to change the agreement, it needs to compensate Chang'an Automobile for possible losses, added the industry insiders. As for how to make up for the possible losses, both Geely and Chang'an Automobile have not given any concrete answer.

Days ago, a sales executive for Volvo China said that the agreement between Volvo and Chang'an Automobile was a long-term agreement and that the Chinese automaker would continue to build two Volvo models in China as before.

For the time being, Chang'an Automobile, based in Chongqing, southwest China, is responsible for the production of the two Volvo models S40 and S80L in China.

Geely, parent of Geely Automobile Holdings Ltd. (SEHK: 0175), signed an agreement in Sweden on March 28 upon the purchase of 100 percent of Volvo for USD 1.8 billion.

The buyer will complete the acquisition in August. It has decided to locate the China headquarters of Volvo, the R&D center of Volvo China, and a Volvo production base in the eastern Chinese city of Shanghai, and signed related framework agreements with the government of Jiading District, Shanghai, said previous reports.

Geely has come up with a plan to nearly double the yearly output of Volvo around the globe. The Chinese company is set to build a new factory with an annual production capacity of 300,000 vehicles in China after acquiring Volvo.

Meanwhile, Chang'an Ford Mazda has not bet heavily only on Volvo models, but also on such products as the classic version of the Mazda3, which hit the Chinese market not long ago.

The classic version, with a price range from CNY 112,800 to CNY 149,800, was finally launched after the venture has upgraded the Mazda3 in 37 aspects and lowered prices of the version.

From January to May, the venture saw a sale rise of 56 percent, and it is expected to be confronted with a certain challenge in the second half of 2010.