Geely-Volvo deal marks bigger global role
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Zhejiang Geely Auto's purchase of Ford Motor's Volvo Car Corp is a signal that Chinese car makers are positioning to play a more significant role in the global automotive industry, according to market watchers.
The US$1.8 billion deal signed late Sunday was the biggest overseas acquisition by a Chinese car maker, especially of a premier brand.
"The purchase marks the growth of the Chinese auto industry after ranking as the biggest auto market," said Fu Yuwu, secretary general of the Society of Automotive Engineers. "Chinese auto makers should be more courageous in overseas purchases."
Buying Volvo fits Geely's overall strategy to enhance its brand image from a low-end car producer to a bigger manufacturer with more advanced technologies as well as being more globally competitive, analysts said.
But for a small privately owned Chinese car maker with no experience in running an international brand, most analysts questioned Geely's ability to manage Volvo in the long run and cautioned that it's too early to call the deal a success.
Under the deal, Geely will also own Volvo's assets including nine product line-ups, three latest production platforms and related intellectual property rights. The deal still needs regulatory approval before being completed in the third quarter.
Geely has drawn a blueprint for Volvo's survival, including running the company separately, keeping existing Volvo plants in Sweden and Belgium as well as looking at production opportunities in China.
"Whether Volvo would gain a new life relies heavily on the Chinese market," said John Zeng, an auto analyst from consultant Global Insight in Shanghai. "What Geely needs to do first is to lift Volvo's sales in China."
Last year, Volvo nearly doubled its sales in China to 23,000 units. But it's still small compared with Audi which sold more than 130,000 units and BMW which sold over 90,000 units.
Ford's Chinese venture Changan Ford Mazda produces Volvo S40 and S80 sedans in China.
Li Shufu, chairman of Geely, said the Chinese auto maker targets to make Volvo profitable within two years.
Geely is reportedly planning a plant in Beijing, which will produce 300,000 Volvo cars in China per year.
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