The future

Zhejiang Geely is expected to face tough challenge after acquiring the Volvo brand.

The company has little experience selling cars outside China, let alone running major manufacturing operations in Europe. In addition, Geely established its reputation for low-end cars, which, along with its lack of global stature, could be a drag on Volvo's reputation for quality and performance.

But Nick Reilly, President of General Motors International Operations in Shanghai said people could underestimate the true capabilities of the Chinese Auto industry.

"Their rate of progress in terms of technology, innovation and quality improvements is really remarkable," said Reilly, who didn't think technology or intellectual property is the primary target Geely has for the Volvo deal.

"It can mean a great leap forward for Chinese car exports," he said.

Geely's chairman believes the integration itself will be advantageous for both Geely and Volvo. "It may face cultural barriers, but if the integration is properly guided, the result will be beneficial for all," Li said.

Li wants to radically slash the Swedish brand's costs for some of its primary operations, such as product development and manufacturing, by tapping the relatively cheap labor available in China.

While retaining Volvo's existing manufacturing facilities and management teams in Sweden and Belgium, Geely plans to build another plant in China, most likely near Beijing or Shanghai, to double production of Volvo cars.

"China, the largest car market in the world, will become Volvo's second home market," Li said at the news conference.

At another press conference on the Volvo takeover in Beijing on March 30, Li said Geely is ready to inject $900 million worth of operating capital into Volvo.

"We should not only inject money into Volvo, but also endeavor to improve Volvo's profit-making capability," Li said.

Volvo's biggest problem was its small production scale and high research and development expenses, Li said, adding Volvo should try to increase production and sales to cut costs.

Made-in-China Volvo may get a boost from the Central Government's recent plan requiring at least 50 percent of government cars be homegrown. At present, Volkswagen AG's Audi A6 is the car of choice for Chinese state officials.

One tricky part of the deal could be separating Volvo from Ford—technology, intellectual property and designs of Ford and Volvo have been deeply integrated in the 11 years since Ford purchased Volvo, said Li Yang.

"If the problem is well handled, the purchase could help Geely attract Volvo suppliers and polish its technologies in making luxury cars for the Geely brand, as the sales of Land Rover did for BMW and Ford," Li said.

The ambition

Geely Chairman Li Shufu, the son of farmers from Taizhou, Zhejiang, always dreamed of making a choice car for customers worldwide. He turned Geely, a small business building motorcycle parts, into one of China's fastest-growing companies in more than a decade.

The former head of a refrigerator factory had already invested 2 billion yuan ($292.8 million) in his car dream when he got the license for car manufacturing in 2002. In May 2007, Geely changed its slogan from "making quality and affordable cars for the masses" to "making the most environmentally friendly, energy efficient and safest cars for the world," a clear confirmation of its global ambitions.