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Six Chinese auto parts suppliers plan to invest a combined 5 billion yuan (about 756.5 million U.S. dollars) in Chengdu in southwest China to produce seats, battery packs, bumpers and other parts for automaker Volvo Cars.

The suppliers inked the deal with the government of the economic and technological development zone of Chengdu, capital of Sichuan Province, on Friday.

Volvo Cars currently has a manufacturing plant in Chengdu, where its XC60 models are produced.

“Bringing suppliers to Chengdu not only optimizes Volvo’s value chain, but also helps us realize our commitment to China, the world’s largest single auto market,” said Li Hai, vice president of procurement of Volvo Cars Asia Pacific, at the 2020 Volvo Car Asia Pacific Supplier Convention held in Chengdu.

Apart from Chengdu, Volvo Cars has manufacturing bases in Daqing of Heilongjiang Province, Luqiao of Zhejiang Province and Zhangjiakou of Hebei Province.

Li said that more than 50 percent of Volvo’s auto parts suppliers are based in eastern China, hoping that more suppliers could move closer to the plants in Chengdu and Daqing to localize the production of cars.

China is playing an increasingly important role in Volvo’s supply chain. The number of Chinese suppliers for Volvo Cars has risen from “almost zero” in 2010 to more than 1,700 now, with the country accounting for more than 30 percent of global purchases, according to Yuan Xiaolin, president and CEO of Volvo Cars Asia Pacific.

Yuan said since the COVID-19 outbreak, China’s localized supply strategy has played a “non-negligible role” in ensuring the stability of Volvo’s supply chain.

Volvo Cars, founded in 1927 and headquartered in Gothenburg, Sweden, was acquired by Chinese automaker Geely in 2010. Enditem

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