Geely will cease the construction of new factories and utilize Volvo's production facilities instead.

      Li Shufu, the billionaire chairman of Geely Holding Group who purchased Volvo Cars from Ford for $1.8 billion in 2010, has come to a realization that many of his counterparts in the global auto industry have been slow to acknowledge: there are too many car factories globally, and adding more is a financial folly. In a statement covered by Bloomberg and the South China Morning Post, Li announced that Geely would cease the construction of new production facilities worldwide and instead rely on existing plants, especially those belonging to Volvo Cars, for vehicle manufacturing in international markets.

      This announcement marks a formal shift in strategy for China’s second-largest car manufacturer. Instead of acquiring land, building factories, installing machinery, and hiring new labor forces in different regions, Li indicated that the company would focus on partnerships, integration, and optimizing current production capacity. His approach is pragmatic, acknowledging that the global automotive production excess is estimated to be between 5 and 20 million vehicles annually, based on various sources, while domestic demand in China represents approximately half of its production capacity. Li seems to suggest that the era of rapidly expanding to achieve global scale is over.

      The most immediate implication is that Volvo's network of factories in Sweden, Belgium, China, Malaysia, India, and the United States will be central to Geely’s international goals. Li informed Bloomberg that Volvo should start manufacturing models for its Chinese sister brands at its existing facilities, allowing for the utilization of underused capacity and providing Geely with manufacturing resources in Europe and America without the substantial costs associated with building new plants. Currently, the Volvo facility in Ridgeville, South Carolina, produces the electric EX90 and will soon add the XC60. The Ghent factory in Belgium began production of the EX30 in April 2025 after relocating manufacturing from China to circumvent EU tariffs imposed on Chinese-made electric vehicles.

      The current tariff scenario has made such flexibility not only beneficial but crucial. Since the implementation of the Trump administration’s tariffs on imported vehicles and auto parts in 2025, the global automotive sector has incurred over $35 billion in losses, as reported by Automotive News. European automakers alone absorbed approximately $6 billion of that amount in 2025. Volvo, in particular, faced substantial challenges: in April 2025, the company announced a restructuring plan costing SEK 18 billion (around $1.9 billion), which involved laying off about 3,000 employees, or roughly 15% of its office workforce. This restructuring was completed by autumn 2025, with financial improvements expected to start appearing from the fourth quarter into 2026.

      In response to tariff-related pressures, Volvo has swiftly regionalized its production. The company has reorganized its global operations to enhance decision-making authority across its three main business regions: the US, China, and Europe. Polestar, the electric performance brand also owned by Geely, has centralized the global manufacturing of the Polestar 3 at Volvo’s factory in South Carolina, abandoning earlier plans to produce the vehicle in Chengdu, China. Additionally, a new Volvo factory in Slovakia is set to manufacture the Polestar 7 for the European market. The strategy is straightforward: produce where you sell, leveraging existing plants in the appropriate locations.

      Li’s commitment to avoiding new factories expands this strategy further. Instead of confining it to Volvo, he intends to apply it to Geely’s entire portfolio of brands, which includes Lynk & Co, Proton, and the commercial vehicle division, while also extending it to collaborations with external companies. Geely is reportedly in preliminary discussions with Ford to utilize the American automaker’s unused production capacity in Europe for manufacturing Geely vehicles, with talks occurring between representatives from both companies in Michigan and China in early February 2026. Additionally, Geely has partnered with Renault in South Korea and Brazil to produce and distribute vehicles based on Geely platforms through Renault’s factories and sales channels.

      This approach represents a reversal of the trajectory that analysts expected Chinese automakers to follow. For years, it was anticipated that companies like BYD, Geely, and SAIC would mimic the model established by Japanese and Korean manufacturers in the 1980s and 1990s: exporting first and then setting up local factories to ensure market entry and establish positive political relations. Some continue to pursue this path, with BYD building factories in Hungary, Turkey, Thailand, and Brazil. However, Li believes that economic conditions have changed, and with significant global overcapacity and unpredictable tariff policies, investing capital in fixed assets that require years to build and decades to recover seems riskier than in the past.

      Geely's aspirations remain extensive, targeting 6.5 million vehicle sales and 1 trillion yuan in revenue by 2030. Li Shufu personally invested $200 million in Polestar in June 2025, and Geely is expected to announce its entry into the US market within the next two to three years, likely utilizing factories it already owns through Volvo rather