Automakers tend to concentrate their manufacturing activities for efficiency, with Geely being an exception. Selling 430,000 cars last year, the Hangzhou-based company operates or builds vehicle assembly lines in ten cities across the country, and engine and auto parts plants in several more. Now preparing to produce Volvo cars in China, it seems to follow the same strategy of de-centralization: with vehicle production capacity being created in Daqing and Chengdu, in Northeast and Southwest China, respectively, construction of a Volvo engine plant, as we learned earlier this week, is underway in Zhangjiakou, Hebei.

According to a high-level official of Volvo China, Geely has decided to build the engine plant in Zhangjiakou after negotiating with several cities in the past two years (previous media reports said Volvo engines would be made in Jiading, Shanghai, where Volvo China is based, and Chengdu). Information from the Zhangjiakou government revealed that last May Geely Chairman Li Shufu attended the ground-breaking ceremony for the plant, located in the city’s Nanshan Development Zone. While construction has already begun, the city is still waiting for the final ratification of the project from higher-level authorities.

Analysts point out two reasons behind Geely’s selection of Zhangjiakou. First, it is close to Beijing. Travel to the capital will take only 45 minutes on the high-speed rail currently under construction. Also important are the generous subsidies from the local government in the form of cheap land, favorable tax terms, and promise of infrastructure building. According to the project’s bidding announcement, the engine plant will occupy a land of 26.6012 hectares, which can be used for 50 years for a low price of 26 million Yuan.

The Zhangjiakou plant, set to open in 2014, will be able to produce up to 600,000 engines a year. Four types of 1.3-2.5L displacements, including the 1.3T, VEP, 15P, will be manufactured here. They will power not only Volvo cars made in Chengdu and Daqing but also some Geely models.

At this year’s Beijing auto show, Volvo China said that it targeted to produce and sell 200,000 vehicles a year in China by 2016 and release 10 new models between 2012 and 2018.

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