Geely: Creation of a Global Automotive Empire
December 2022
Li Shufu started Geely as a refrigerator business in 1984, using a small loan from his father. Li went on to acquire a failing Chinese motorcycle manufacturer in the early 1990s. He later formed Geely Auto which started selling its first mainstream cars in 1997. Fast forward to 2021, Zhejiang Geely Holding Group a.k.a. Geely, sold over 2.2 million vehicles in 2021. Li Shufu has built Geely’s global automotive empire essentially over the past 14 years, acquiring stakes in strategic assets and gaining full ownership of companies in disarray, turning them around and creating synergies between them.
Taking Partial or Full Ownership of Existing OEMs
Geely has relentlessly gained full ownership or acquired stakes automotive OEMs or automotive-related assets in difficulty, injecting capital to initiate their transformation. Targets are essentially based in Europe and to a lesser extent in Asia.
Geely’s first major move was its acquisition of Volvo Cars from Ford in 2010 for $1.8B. At the time, the American OEM needed to offload non-strategic assets after a deep recession. Then, Geely and Volvo were of similar size selling around 400k vehicles each. Sales by the Swedish entity reached 700k in 2021.
Three years after this first big step, Geely acquired London Taxi Company, maker of the traditional London cab. The Chinese company renamed it London EV Company (LEVC) and helped it develop a completely new electric cab while preserving the charm of the old version (see below). The new vehicle is even available in left-hand drive and can be seen on the streets of Paris.
In 2017, Geely continued its buying spree acquiring 51% of British sports car maker Lotus. Under the impetus of its new majority shareholder, Lotus will soon introduce Eletre, its first SUV, which will be electric of course.
The same year, Geely bought 49.9% of Proton, Malaysia’s historic OEM, as well as 100% of US-based Terrafugia which had been working on a flying car since 2006. This was Geely’s first foray in air mobility, a domain in which the company is now planning on playing a key role. In 2021, Geely announced a JV with Germany’s Volocopter to introduce urban air mobility in China.
The company then stepped into the heavy truck market, acquiring an 8.2% stake in Sweden’s AB Volvo for 3.9B€.
Geely made yet another major move in 2018. It disclosed having bought a 7.3B€, 9.7% stake in Daimler, becoming its largest shareholder. I assume Geely has maintained a similar position in both Mercedes-Benz and Daimler Trucks after the German company split its operations, providing the ambitious OEMs a second strategic position among global heavy truck majors.
In 2022, Renault announced it will sell a 34% stake in Renault Korea Motors to Geely. The Pusan-based manufacturing unit, which has been operating significantly under capacity for many years, can be used by Geely to export vehicles tax-free to the USA as well as to penetrate the local market.
Geely’s latest move is the acquisition of a 7.6% stake in UK’s Aston Martin a few weeks ago. It is interesting to note that the British sports car maker sources powertrains, infotainment systems and more from Mercedes-Benz, another OEM in the Geely galaxy.
Creating New Brands from the Ground Up
Acquiring full or partial control of existing assets does seem to suffice. Geely has created several automotive brands since 2017, essentially moving upscale from the original, mainstream Geely Auto.
These new brands include Lynk & Co (model 05 below), Geometry, Polestar or Zeekr (model 001 above) which started selling vehicles respectively in 2017, 2019, 2019 and 2021. Whereas Lynk & Co’s vehicles are currently HEVs and PHEVs, those sold by the other three brands are exclusively BEVs. All are currently produced in China though Polestar is planning on manufacturing its next vehicle, Polestar 3, at Volvo’s US plant. In hindsight, this is well-timed given the USA’s new EV incentive plan (IRA).
Whereas Geely Auto sold 1.3 million vehicles year-to-date (of which 179k were exported), Lynk & Co reached 158k units (incl. Europe) and Zeekr 61k vehicles. Geometry sold 14k units just this past month whereas Polestar aims to sell 50k globally in 2022.
Geely does not directly control 100% of Lynk & Co, or Polestar — though it indirectly does. Instead, Volvo is a shareholder of both companies, controlling 20% in the former and 50.5% in the latter. I suspect this is aimed at ensuring Volvo is motivated to share technology and a bit of its European flare with these emerging brands to help them get off the ground with the best pedigree possible.
As for Zeekr, the higher-end brand raised $500M last year from battery maker CATL, Intel and others. Geely is now reportedly preparing an IPO in the USA, seeking to accelerate Zeekr’s growth.
Last, Geely seems to make an effort to keep the image of each brand clearly separate from the parent company and its Chinese identity, whether they be brands Geely acquired or created.
Synergies and Efficiencies Across Geely’s Various Stakes
The broad portfolio of brand, platforms, powertrains, production sites Geely has created across the globe creates significant potential to bring about engineering, supply chains, manufacturing and distribution efficiencies which the conglomerate seems to have only started to scratch the surface.
Geely’s 2018 stake in Daimler led it and Mercedes-Benz to form a 50-50 JV in 2020, with the aim to operate the Smart brand and build a new generation of models in a purpose-built EV factory in China. Geely will be responsible for engineering and developing the new vehicles for global markets.
In 2021, Volvo Cars & and Geely created Aurobay, a stand-alone business for joint ICE-based powertrain operations, in order to most efficiently manage products with declining volumes. The entity will be responsible for the engineering and manufacturing of engines & transmissions, with the ambition to supply customers outside of Geely.
The financial deal Geely and Renault struck in Korea a few months ago came with a plan for the latter and Geely Auto to jointly develop products for the Korean and export markets. They will use Geely’s CMA platform which already underpins the Volvo XC40 and Lynk & Co 01.
Very recently, the two partners decided to expand their industrial cooperation as Renault decided to spin off some of its activities. The French OEM and Geely agreed to create 50-50 JV bringing together Renault’s ICE business, a.k.a. “Horse”, and Geely’s Aurobay. The entity will supply multiple brands — potentially outside Renault & Geely — with a complete range of powertrains including ICE and hybrid solutions. It will comprise 17 powertrain plants and 5 R&D centers in 3 continents with around 19,000 employees.
Earlier in 2022, Geely also founded ECARX, a company aimed at developing HW and SW solutions for connected, automated and electrified mobility. It will initially serve its own / partner brands starting with Smart but will likely reach beyond eventually.
Partnerships to Build Robotaxis
Geely is satisfied dealing with “regular” land vehicles, motorcycles and air-borne mobility. The company is preparing for the future by entering the robotaxi space with two partnerships, one in China and one in the USA.
Last year, Geely and Chinese internet giant Baidu formed Jidu, a 45-55 JV focused on developing robotaxis based on the former’s SEA platform. Jidu expects to deliver its first vehicle, Robo-01 in late 2022. The 4-door SUV is intended to operate with Baidu Apollo Level 4 autonomous driving system and its complete sensor suite (incl. 2 Lidars) starting in 2023.
In parallel, Geely’s Zeekr is developing a robotaxi for Alphabet’s Waymo. First presented in 2021 as a concept vehicle, the M-Vision will eventually be fitted with Waymo’s Driver. Given the 25% import tax imposed by the USA on vehicles produced in China, it would make sense for Geely to use one of its non-Chinese manufacturing plants to produce the vehicle. The underutilized Korean site now co-owned with Renault could be a great fit given its relatively low-cost base.
How far will Li Shufu’s ambition take Geely?
Marc Amblard
Managing Director, Orsay Consulting
Feel free to comment or like this article on LinkedIn. Thanks!