Volvo's decision to build its first American factory in South Carolina may only marginally improve the automaker's US sales, according to an industry observer.

Volvo, based in Gothenburg, Sweden, is owned by the Chinese company Zhejiang Geely Holding Group Co, in Hangzhou, Zhejiang province.

On Monday, the company said it would invest $500 million to build a plant that it hopes eventually will employ 4,000 people at the Berkley County site, about 30 miles northwest of Charleston, South Carolina.

Geely purchased Volvo from the Ford Motor Co in 2010. Volvo sold nearly 466,000 vehicles globally last year, but US sales fell about 8 percent to 56,371.

Jay Baron, president and CEO of the Center for Automotive Research in Ann Arbor, Michigan, said a plant in South Carolina will only marginally help sales in the US market.

"Most buyers are not that focused on where vehicles are made," Barron said in an e-mail. "I'm sure Volvo will try to use this location as a marketing attribute for the US, but successful sales will be driven by other factors."

South Carolina is on its way to becoming the "Detroit" of the South, particularly with foreign automakers. BMW built a plant in Greer more than 20 years ago, and Daimler AG is building its Sprinter vans at a plant in Ladson.

In addition to South Carolina, Volvo was reportedly looking at sites in Georgia and Mexico. Many observers thought Mexico would get the plant.

"The supply chain in South Carolina is better developed than in Mexico, and this would help with launching a new product so far away from Sweden," said Baron.

"There are many advantages to being in Mexico, so the combination of incentives from the region; an available work force and more mature supply chain are probably the major factors.

"Managing the launch and operation of an assembly plant for a premium car like Volvo will likely be less challenging for Volvo in the US than in Mexico," he said.

Stephanie Brinley, an analyst at IHS Automotive, said the US facility will enable the company to reassure certain US consumers. "The plant will allow them to appeal to US buyers that are concerned about the perception of Volvo being a Chinese-owned company. It will also give them the capacity to produce and sell more vehicles," she said.

paulwelitzkin@chinadailyusa.com