Mike Stevens | Aug 23, 2010

Just weeks from announcing its acquisition of Swedish carmaker Volvo, China's Geely Holding Group has reportedly confirmed plans to develop a new flagship model that would compete with BMW's 7 Series and the Mercedes-Benz S-Class.

Speaking at Volvo's Gothenburg headquarters, former Volkswagen US boss and now Volvo CEO Stefan Jacoby said that the brand needs to compete in the major leagues, on its own terms.

"I'm very committed to bring Volvo to where it belongs, in the top league of the premium manufacturers. We cannot say, 'just do what BMW is doing.' We need to find our Swedish-based definition of what Volvo should deliver," Mr Jacoby said.

He added that his management will work to determine exactly what perception the Volvo brand has in the market, and what the company needs to improve on to achieve its upmarket aspirations.

Mr Jacoby's comments follow those made by Geely Chairman Li Shufu after confirming finalisation of the brand's acquisition, saying that he wants to see Volvo develop an in-brand line that will compete better with top-tier luxury brands.

"We want to make more high-level cars that compete with the S class of Mercedes Benz and the 7 series of BMW. We need products to compete in that segment," Li Shufu said.

It could be some time before we see Volvo make the leap to top-shelf luxury however, with Li conceding that Volvo's Board of Directors will need to approve any such plans.

In Australia, BMW's 7 Series starts at $198,800 for the 730d - more than double the $79,950 starting price for Volvo's flagship S80 line-up.

Plans are also in place for Volvo to dramatically increase sales through its volume-selling models, with Geely set to establish a factory in Beijing that will make 300,000 Volvo-branded cars each year.

Geely aims to boost its total production - including Volvo cars - from 330,000 sales in 2009 to two million by 2015.

Earlier this month, Geely finalised payment of US$1.8 billion for the Volvo Cars brand and assets, which included a USD 200 million note and the balance paid in cash.

The sale comes as Volvo reports an AU$58 million profit on global sales in the second quarter of 2010, up from an AU$263 million loss for the same period last year.

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