The technical failure blocks Volvo’s China risk

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The delay is deeply embarrassing for Volvo Cars VOLCAR B -0.90% Today’s development. When the EX90 was launched last November, production was promised to start this year. Now the announcement is that the model will begin production in the first half of 2024. The software failure also shows that the positions of strength in the technology area have changed. The sharpest technology is no longer developed by Volvo Cars but by the main owner Geely. In the development of the smaller SUV EX30, Geely takes no chances and uses its own platform. “Instead of excelling with its own technology, it will now be Geely’s new universal platform SEA that will save the sales volume for both Volvo Cars and Polestar,” wrote Di’s car reporter Karin Olander in a comment. The announcement that it is Geely’s technology that will dominate Volvo Cars in the future also shows that Volvo Cars’ autonomy is a kind of charade. Volvo is a Geely company. Although listed, Li Shufu’s Geely owns 82 percent. Li Shufu is also the company’s chairman. With the Chinese ownership comes a political risk, which is becoming an ever-increasing problem – not only for Volvo Cars and its owners, but also for Sweden. The fact that the technology in Volvo’s models is increasingly Chinese is in this perspective yet another aggravating circumstance. Nowhere else in business are the geopolitical tensions between China and the West greater than in the car industry. The manufacture of cars involves all the areas where the measurement of force is greatest: semiconductors, software, artificial intelligence and battery cells. Whoever has a technological advantage in these areas has a great advantage in the transition to electrified vehicles. US President Joe Biden and European Commission President Ursula von der Leyen are clear that the West must make itself less dependent on China when it comes to technology and raw materials. The previously naïve view of trade with China has been replaced by healthy skepticism. EU foreign ministers repeated this message when they met informally in Stockholm last weekend. The EU must reduce its dependence on China, it was decided. It is easy to say but difficult to implement. China is the EU’s largest trading partner. More and more politicians in the EU, like the US, want to introduce rules that subsidize, favor and protect domestic vehicle manufacturers. At the same time, European car companies are completely dependent on China as a car market. What happens if China embarks on the same protectionist path? The auto industry is dependent on China, not only as a market but also as a supplier of batteries and other inputs. The competition between Chinese and European car manufacturers has benefited the development of technology and made electric cars affordable for all consumers. It is undoubtedly a positive development. But you cannot close your eyes to what is happening in the world political arena. In totalitarian China, the line between the state and business is fluid. China systematically uses all societal resources, including businesses, to achieve its goals. With its friendships with Putin’s Russia, China has chosen the wrong side in the bloody war in Ukraine. The horror scenario is that President Xi Jinping makes good on his threats to incorporate Taiwan into China. A US-led sanctions campaign, in response to Chinese aggression, would create major problems for the China-dependent auto industry and for world trade in general. Understanding and adapting to this reality is necessary for all Western auto companies in China. The world’s largest car market no longer only holds opportunities. Western car brands with a large proportion of Chinese technology, such as Volvo, risk being hit hard by the growing suspicion in the West of everything Chinese. Geopolitics affects Volvo Cars more than most other companies. This difficult situation is not only a matter for the company’s board and owners – it is a matter for all of Sweden. Volvo Cars is one of the country’s most important and largest employers. The government therefore has every reason to closely follow what happens at Hisingen and what technology is used in the cars. The China risk in Volvo Cars has never been greater.

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