Volvo up against stronger Asian rivals

VOLVO   AUTOMOTIVE   ASIA   MANUFACTURERS

Asia - Swedish-based Volvo may be facing stronger competition from its Asian counterparts in China and India, but its chief executive believes European automakers can hold their ground in the global market.

Leif Johansson, chief executive of Volvo says China and Indian auto manufacturers are benefiting from rising sales in their domestic markets. China produced 49% of the world's heavy and medium-sized commercial vehicles last year, a 20% increase from 2006. The country's truck makers are also starting to export into emerging markets like Africa and Southeast Asia, raising the stake for Volvo and its fellow European rivals.

Chinese exports of commercial vehicles rose 25% in the first half of 2010. Its trucks are also significantly cheaper than their western counterparts. However, Johansson believes local producers will soon see production costs increasing as they move up the value chain, effectively evening out the difference.

"Indian and Chinese engineers, over time, will not be dramatically lower paid (than those in the west). So the worst is behind us when it comes to the cost gap," he says.

Volvo has a manufacturing base in China through a joint venture with Dongfeng Motor Group. However, the majority of its capacity remains in Sweden and other high-cost countries, Financial Times reports.

The group has already decided to shift more production to Asia, and announced plans to build a base in India.

Volvo sees a diminishing pool of engineers, in which Johansson believes threatens the competitiveness of European automakers.

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