22 Jan Geely’s billionaire owner still wants to add brands

Bloomberg News, January 16, 2020

When auto tycoon Li Shufu emerged as a suitor for Volvo Cars a decade ago, few outside China had heard of him. Now the billionaire’s name pops up as soon as there is a whiff of a deal in the industry.

Not only did Li’s Zhejiang Geely Holding Group snap up Volvo in 2010, he made the acquisition work and followed up with purchases of Lotus Cars, London’s iconic black cabs and a stake in Daimler. This week, Geely emerged as a potential investor in Aston Martin, and last year was approached by the parent of Jaguar Land Rover for a potential tie-up.

Li’s track record of making deals succeed puts Geely in the driver’s seat in Asia as automakers seek combinations to prepare for turbulence ahead. The industry is facing a tectonic shift toward electrification, self-driving vehicles and mobility services, which are crimping demand for individual car purchases and squeezing out weaker players.

“Li Shufu believes the industry doesn’t need so many players in the future,” said Shi Ji, an analyst with Haitong International Securities in Hong Kong. “Geely’s success with Volvo has made it more confident that it can develop faster via mergers.”

Li cemented his reputation as a savvy deal-maker by reviving Volvo Cars in the face of widespread industry skepticism. He gave the Swedish manufacturer’s engineering team the resources to invest in new models. At the same time, he lowered Volvo’s high costs by jointly developing vehicle underpinnings with Geely, while building a plant in lower-cost China for exports to markets including the U.S.

“Chinese entrepreneurs see global acquisitions as a fast track of growing their business,” said Xu Haidong, an assistant secretary general of China Association of Automobile Manufacturers. “Geely has demonstrated to the world that they can make it work.”

More acquisitions and discussions around the globe ensued. Last year, Geely was approached by Tata Motors, JLR’s owner, for a deal including the beleaguered British luxury business, following an earlier report of interest in Alfa Romeo and Maserati (something the company denied).

“Traditional Chinese companies are strong in the manufacturing, processing side of business and not so much on branding, technology and business model,” said Thomas Fang, a partner and Greater China vice president at Roland Berger in Shanghai. To realize its vision of becoming a comprehensive mobility-service provider, “Geely needs to make best use of its acquisition and integration capabilities.”

It recently emerged that Geely held preliminary discussions about a possible investment in Aston Martin. Geely is primarily interested in a technology-sharing deal that could benefit businesses such as Lotus, according to people familiar with the matter. Geely, based in the city of Hangzhou near Shanghai, declined to comment.

“The historical trend of economic globalization is irreversible,” Li said in a speech earlier this month. Geely should “work together with international partners” to “seize the technological commanding point through collaboration and sharing.”