Volvo plans new European plant and capacity expansion
Since Volvo Cars was acquired by Chinese Geely in 2010, it has grown steadily, with an all-new platform and a whole new range of engines powering its sought-after lineup of vehicles, spearheading the new XC90 SUV, launched in 2015. The necessary refresh has seen sales figures skyrocket over the past decade, peaking sales of 700,000 units in 2019 – more than double the 2009 figure.
Increased demand for the company’s vehicles has strained its production network as it strives to build enough cars to meet new customer demand. This is particularly visible in its traditional home markets in Europe, which are served by cars built at the company’s factories in Ghent, Belgium, and Gothenburg, Sweden.
GlobalData’s light vehicle production forecast shows that these factories are expected to operate at almost 100% capacity over the next three years, which equates to a total capacity of 570,000 units. If mitigation measures are not taken to ease the pressure on Volvo’s European factories, their production could even exceed their theoretical maximum capacities.
This background sheds light on why Volvo Cars is considering opening a new European plant, according to an interview with company CFO Bjorn Annwall in Automobilwoche. The company has given no further guidance on the location or timing of the plant other than establishing that it will be in Europe.
While some European OEMs have moved their production networks east of the continent to countries like Slovakia, the Czech Republic and Hungary to take advantage of their lower labor costs, Volvo may choose to keep its third European factory closer to home. The company offers a growing range of electric vehicles, including the Volvo Recharge range and the Polestar sub-brand for electric vehicles, all of which require a constant supply of batteries to be built. Volvo may decide to stay close to Sweden to take advantage of Li-ion cell production from Northvolt – a Swedish battery supplier with local facilities to supply European OEMs including Volvo, Volkswagen and BMW.
GlobalData’s capacity utilization forecast shows Gothenburg and Ghent are expected to reach 100% utilization within three years – potentially as early as next year for Sweden, with Belgium expected to reach 100% by 2024. This underlines Volvo’s need for a more localized Europe. capacity.