China recently bought the Volvo brand from Ford Motor Co. The country’s Vice-President, Xi Jinping, spent a weekend in Sweden, where he penned a deal with Ford to purchase Volvo for $1.8B. The Chinese automaker Geely Automobile now controls the long-standing Swedish brand.
Last year, China surpassed the United States as the world’s largest car market. They have a desire to move into the U.S. and European markets, but lacked both the technology and the brand notoriety to adequately penetrate these already competitive markets. With the acquisition of Volvo, China can now gain considerable footing, since the Swedish brand is well established.
China also plans to integrate the Western brand into their home market as well. A spokesman for Geely said that while the company plans on maintaining Volvo’s current sales in Western markets, they plan on expanding the brand into a Chinese automotive presence. Part of the plan includes opening a Chinese Volvo factory, which would support the factories the company has in Sweden and Belgium.
The acquisition bodes well for China, whose recent attempt to buy Hummer from GM fell through. While $1.8B is far less than the $4.9B Ford paid for Volvo 11 years ago, spokesmen for Ford have stated that they are satisfied with the purchase and feel the price is fair. Both parties hope to complete the transaction by the third quarter this year.
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