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At the beginning of the Volvo M&A project, Li Shufu began throwing bait to many provinces and cities across the country - Volvo's domestic site selection, in order to get the local government to increase the "treatment" when competing for the project. Chengdu and Daqing, which won the competition of many local governments, are also actively racing in the development of Volvo's domestic projects.
Two years ago, due to the concerns of relevant ministries and commissions leaders that Geely might sell Volvo, Li Shufu did not agree with Li Shufu's plan for domestically produced Volvo directly under the self-owned brand model, and subsequently considered Volvo's unfavorable revenue conditions. Therefore, Volvo’s joint venture plant had 30 Volvos. % of low-share ratios are for joint ventures.
Obviously, the two Volvo plants in Chengdu and Daqing have completely different models. One is Geely Holding’s sole proprietorship, the Zhejiang Haoqing Chengdu Branch. This factory also has a brand externally, which is carved into the "Chengdu Volvo Car Manufacturing Factory" on the factory's entrance to Dashi. Production Volvo 60 series products, such as S60L and XC60; a company established in the joint venture model Daqing Volvo automobile manufacturing plant, of which Geely Holding 70%, Volvo 30%, producing 90 Series and 40 Series products, such as XC90 and S40.
According to an insider from Volvo, the current capacity planning for Chengdu and Daqing is now designed to produce 125,000 peak units. Even in terms of capacity planning and product selection, Li Shufu also tried to make the two plants look more balanced, and did not favor one another. This may be the situation that the two governments can accept.
In fact, as early as the beginning of 2009, Geely formally discussed with Ford on the acquisition of Volvo Cars. Li Shufu’s investment promotion game among local governments also began. Because the acquisition of Volvo and ensuring that a large portion of Volvo's future operations are dependent on local government financing, Li Shufu’s original idea was where to invest and where the future domestic base would settle.
Daqing City Government’s state-owned investment companies even directly participate in the acquisition of Volvo’s parent company, Geely Zhaoyuan International Investment Co., Ltd., with a share of approximately 37%, second only to Geely’s second largest shareholder (Geely’s shareholding exceeds 51%, The rest is held by state-owned investment companies in Jiading, Shanghai.
In order to stabilize the confidence of local governments, in February 2010, Daqing City State-owned Assets Management Co., Ltd. and Zhejiang Geely Holding Group Co., Ltd. signed an "investment cooperation agreement," which provides a period of five years plus a 180-day grace period. The general content of the agreement is that if the Volvo project fails to be completed and put into production within the time limit, the local government has the right to recover the funds, and it also agrees on the return on investment. At the same time, Geely Holding also signed a five-year investment cooperation agreement with Chengdu. However, Chengdu does not directly invest in shares as in Daqing. Instead, it supports Geely with loan financing and domestic project subsidies, and is promptly implemented.
According to informed sources from Volvo's domestic projects, the reason why the Chengdu plant has advanced so quickly is due to the co-location of Geely and Volvo with the Chengdu Economic Development Zone. Although Chengdu currently owns FAW-Volkswagen and FAW-Toyota factories under the FAW Group and Sichuan Autos Mustang, a local car company in Sichuan, there are no high-end brands. Chengdu, the fourth city in China, is highly valued by Volvo’s domestically-produced projects. Can make up for the gap in the economic development zone in the manufacture of high-end car brands.
According to Volvo’s top officials, it has been nearly 4 years since the current time has passed. The local government has not thought of divestment, and fortunately local governments such as Daqing, Chengdu, and Jiading have no major changes. However, as a private enterprise, Geely’s acquisition of Volvo’s investment company has attracted nearly 49% of the state’s equity due to financing considerations, which is a measure of equity at that time, and it is reasonable to wait for the time to mature in the future.
However, all this must be based on the smooth completion of the Volvo project's production planning and the satisfaction of the return on local government investment. According to the plan, the production time of the Volvo plant in Daqing has been finalized in the fourth quarter of this year, and the production time of the Chengdu plant is also locked at the end of this year.
As the first year after it was put into production, China's market performance in 2014 was very important to Volvo.