Geely seeks government sales to expand Vovo's Chinese market share

Zhejiang Geely Holding Co, which received backing from Chinese officials to buy Volvo Car Corp, will now seek to gain a share of the government market by targeting bureaucrats to make the deal a success, analysts say.

According to chairman Li Shufu, Geely plans to expand Volvo's China sales nine fold to 200,000 a year within five years, after it agreed to take over Volvo from Ford Motor Co for $1.8 billion. According to analysts, a key segment of the market may be the Chinese government, which spent 80 billion yuan ($12 billion) on official vehicles in 2008.

They say Volvo with its image of being high-end and low-key made a perfect vehicle for government officials and may pose more of a threat to Audi and BMW in the Chinese market.

Volvo's Chinese ownership may also work to increase the brand's appeal to the local government officials who had come in for criticism last year after BMW and Daimler AG were added to a list of approved car vendors.

Volkswagen AG's Audi, the biggest supplier of official cars in China, grosses up to 20 per cent of local sales from the government.

According to Li, Geely would complete the acquisition process of Volvo in the third quarter. It has started looking for a site for a Volvo plant in China, the first in the country.

China will likely overtake Germany as the automaker's biggest market by around 2012, with sales of 250,000 a year, according to Audi.