Volvo CE, a construction equipment subsidiary of Sweden-based industrial conglomerate Volvo Group, has announced it has received the green light from the Chinese Government to set up a wholly owned manufacturing venture in the nation.
According to Volvo CE, the venture, named Volvo Construction Equipment (China) Co Ltd, will be the first foreign wholly owned firm for production and sales of high-end construction equipment in China. Volvo CE said in a statement that total investment in the wholly owned venture amounted to approximately US$15 million.
Construction of the manufacturing venture, to be located in Shanghai, China's economic powerhouse, would kick off in June and operation would begin in March 2003, Volvo CE said.
During the initial stage, the venture would be used for the assembly of crawler excavators and employ around 150 people, Volvo CE said.
The Chinese market for crawler excavators is one of the biggest in the world with annual sales of more than 10,000 units at present, according to the company. The market is expected to grow rapidly in coming years.
"Our new (manufacturing) facility in China is designed to meet future customer requirements and we will be able to produce a couple of thousand machines," Tony Helsham, president and chief executive officer of Volvo CE, said in a statement.
Volvo CE aims to build up a leading position in the Chinese construction equipment market, according to Helsham.
Industry analysts say the Chinese construction equipment market has tremendous potential thanks to massive infrastructural construction in the nation, especially in the western part of the nation and in Beijing which is to host the 2008 Olympic Games.
The market is expected to rise to 76 billion yuan (US$9.2 billion) by 2005 from the current level of more than 50 billion yuan (US$6 billion), according to analysts.
However, domestic construction equipment manufacturers face great pressures from China's entry into the World Trade Organization (WTO).
China will decrease its tariffs on construction equipment imports from the current 10 percent to 16.1 percent on average by 2005. Controls on imports will also be abolished gradually by then.
At present, there are around 1,500 construction equipment manufacturers in China. Besides Volvo CE, other global construction equipment giants, such as the US-based Caterpillar Group, have also set up their manufacturing bases in China.
According to the China Engineering Machinery Association, domestic manufacturers aim to control 75 percent of the Chinese construction equipment market by 2005.
( May 14, 2002)
