Swedish car maker Volvo, owned by Chinese group Geely, said it was on track to meet its long-term goal of boosting sales more than four-fold in China after reporting a fall in 2011 earnings due to costs related to its expansion.
Volvo was bought by Zhejiang Geely Holding Group Co Ltd from Ford Motor Co in 2010. It plans to boost output from over 400,000 cars to more than 800,000 by 2020.
“Overall, we are on track to achieve our long term objective of 200,000 sales in the Chinese market,” the company said in a statement after reporting a fall in 2011 operating earnings to 1.6 billion Swedish crowns ($237.8 million) from 2.3 billion crowns in 2010.
It sold 47,000 vehicles in China in 2011 out of 449,255, but China was the fastest-growing market, up 54.4 percent.
The U.S. market, which remains its single biggest, grew 24.7 percent to 67,273 units while second-largest market Sweden was up 10.5 percent to 52,894.
It said the sales network in China was expanding and that construction at a plant in Chengdu had begun. Geely is also parent of listed Geely Automotive Holdings Ltd.
Volvo said investigations were “ongoing” for a potential second plant as well as an engine plant in China, where its market share was just 0.3 percent last year.
It said the 2011 profit was hit by research and development costs and industrial capacity to support its expansion plans.
“Additionally, unfavourable exchange rates and higher raw material prices affected bottom line results negatively,” it added. It said costs associated with expansion would affect profitability in the short to mid term.
It saw global economic uncertainty continuing to affect consumer confidence this year, with the European car market expected to decrease and the U.S. market projected to improve.
“The luxury segment of the car market in China is projected to increase,” it added.