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Volvo’s failure in China explained

Internal difficulties at Volvo’s management level explain the failure in China, according to a thesis at LiU.

Volvo's efforts to produce trucks in China began in the early 90s and was beset by difficulties as described by Åsa Käfling in her doctoral thesis ‘The Chinese Volvo: Sino-Foreign Joint Ventures and Perceived Performance’.

Åsa Käfling shows that disagreement within the group management led to Volvo failing to produce a truck that was light and cheap enough for the Chinese market. Production at the factory in Jinan stopped in the summer of 2004, after a year and only a couple of hundred trucks. This was followed by the Chinese Government reducing the maximum truck weight and axle loads so that a fully loaded Volvo from Jinan became illegal on Chinese roads.

Volvo's Chinese partner, China National Heavy Duty Truck, CNHTC, however, gained much from the co-operation.

Using technology and tools from Volvo, CNHTC developed the Volvo copy, the Ho Wo, which is similar to the Chinese word for Volvo. Ho Wo became a bestseller in China and surpassed Volvo's own sales in months. Ho Wo also managed to gain market share from Volvo in Iran.

Åsa Käfling speaks Chinese and was able to closely follow the Volvo truck establishment, both at the headquarters in Beijing and in the factory in Jinan. She is critical of Swedish companies’ optimism in China.

“Volvo listened to what was said without questioning whether it would really happen” says Åsa Käfling.

Therese Winder 2009-04-22

Page manager: therese.winder@liu.se
Last updated: 2009-06-03