Geely’s Volvo Roadmap: Laden With Potholes?

Nearly a year after announcing its historic purchase of Volvo, Geely (HKEx: 165) is finally giving its first concrete glimpse at how exactly it’s going to turn around the just-slightly-tarnished Swedish nameplate. The order looks quite tall at first: it’s going to build two new plants in China, one in Chengdu and the other northeastern Heilongjiang, with plans to boost China sales nearly 10 fold to 200,000 units in four years, which would be more than a quarter of its global sales. (click here for article)Talk about going from zero to 60 in very short order. I see all kinds of bumps in the road ahead on this one. We caught a glimpse of what’s to come last year when Geely and Volvo management butted heads on how to position the Swedish brand: Volvo management was bent on keeping its image as dependable and mainstream, while Geely was determined to position it as a luxury brand in image-obsessed China. That spat seems to have been ironed out, at least superficially, with the latest announcement that the brand will be most decidedly luxury, at least in China, going head-to-head with BMW and Volkswagen’s Audi. But I see lots more head-butting down the road on this one before any of these lofty targets ever gets met, and wouldn’t be surprised at all if the Heilongjiang plant, planned for somewhere down the road, never gets built.