Geely wants to merge with its Volvo subsidiary – Les Échos

Posted Feb 10 2020 at 4:59 p.m.

Consolidation continues in the automotive industry, and the next transaction should concern
the Chinese group Geely

    and its prestigious Swedish subsidiary Volvo Cars, acquired from Ford ten years ago. The two entities said in a joint statement Monday that they are planning to merge their businesses, "to create a strong international group, which would accelerate financial and technological synergies between the two companies."

To do this, Volvo Cars and Geely "will create a working group to prepare a proposal to their respective boards of directors," said the press release. According to a Volvo spokesperson, the goal would be to have it completed by the end of the year. The new group could be listed in Hong Kong (as it is already the case for Geely), then in Stockholm.

Dramatic recovery

During this decade spent in the fold of the Chinese group, Volvo operated a spectacular recovery. The year 2019 was completed for the sixth consecutive year of increased sales, with 705,000 vehicles sold worldwide, a new record broken, thanks to the success of its SUVs positioned in the premium segment.

The brand is progressing in particular on the Chinese market (+ 18% in a declining market) and In the United States (+ 10.1%). In France, sales also increased with 21,700 cars sold. In total, turnover increased by 8.5% last year to 274 billion crowns (26 billion euros), with stable operating profit at 1.4 billion euros.

A total of two million cars per year

As David Leggett, an analyst at GlobalData, notes, many synergies already exist between Volvo and its parent company, particularly in powertrains. By merging with its subsidiary Geely intends to amplify them, in order to be able to ensure the investments made necessary by the conversion to electric and autonomous cars. The new entity would be strong with a volume of 2 million cars built per year.

However, the operation risks rekindling fears in Sweden that Volvo Cars' roots in the country will dissolve in the future together. The press release clearly states that "the merger would respect the distinct identity of
each of the brands

   ". But nothing is mentioned on the headquarters of the Swedish manufacturer, now located in Gothenburg.

To note

Geely is also a 9.7% shareholder of Daimler, and a partner of the German manufacturer to build the Smart in China.

Categories Cars

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