Volvo likely to build our cars in China

But Volvo points out it's not alone and won't be the first European to use China's enormous manufacturing and labour expertise to make vehicles for smaller markets such as Australia.

Volvo Cars product strategy vice president Lex Kerssemakers says it was "likely'' that cars would be made in China but insists there would be no difference in quality or performance.

"I can see Volvo cars for Australia coming from China,'' he says. "The only issue may be customer perception. But China makes the S80 for its own market that is equal in quality to the S80 that we make in Sweden. Quality is not an issue.

'' Mr Kerssemakers says Volvo was "a small car manufacturer''. In an interview at the launch of the latest V40 small car in Geneva, he says: "We don't source parts from different manufacturers because we can't afford to.''

"So all components that would go into a Volvo car built in China would be exactly the same as the components that went into a car built in our Swedish or Belgium factories. The way the car is made also would be no different. But the savings in distribution and duty (taxes) as well as the time frame make it very attractive.

"Customers don't really care where a car is made. They do care about quality, performance, reliability and so on. That wouldn't change.''

Volvo currently makes two cars in China and all are only for domestic sale. The cars are a long wheelbase version of the S80 - which is exclusive to China - and the S60. The V40, revealed this week at the Geneva motor show, will also be built in China. Mr Kerssemakers says part of the reason Volvo is looking at increasing the number of its factories was to cope with predicted sales growth.

"We aim to sell 800,000 cars a year within a few years,'' he says. "Of that, 600,000 cars would be made in Europe and 200,000 in China. "Geely (the Chinese parent of Volvo) wants us to be financially self-sufficient and there's no hand-out from Geely. So we have to very carefully plan how we do business.''

But he says that if the sales figures change and the need to build cars for export in China is reduced, Volvo wouldn't do it. However, given the upbeat predictions for the V40 small car, Mr Kerssemakers admitted that a China solution was "likely''.