geely vs volvo

Topics: Automotive industry, Volvo Cars, Automobile Pages: 3 (949 words) Published: December 10, 2013

China's Geely bought the $1.5bn acquisition of Volvo from Ford catapulting a Chinese car maker into the global league for the first time. Geely is one of China's largest car companies. But while the booming Chinese market became the world's biggest last year, the industry is fragmented: Geely sold just 330,000 cars in 2009, the same as Volvo. The group plans to use vast Chinese demand to double Volvo sales, while using the Swedish group's technology, dealership network and global brand to push Geely outside China.  Volvo sales of 335,000 globally are off 11% this year and 27% off their peak, according to this Bloomberg story. The Swedish carmaker has lost $2.6 billion during the last two years. The brand hasn’t been a real moneymaker for a very long time. Its costs are high and prices are strong, but Volvo doesn’t command luxury premiums for its cars. This could be very good deal for volvo as buyers indicate that Volvo won’t just be folded into Geely and lose the brand’s strong Nordic identity. Volvo will keep its own management team, board of directors and headquarters in Gothenburg, Sweden. That would mean that Volvo will keep its Swedish heritage and cachet. European and American Volvo loyalists will still be buying cars engineered in Gothenburg and built in Europe.  The Chinese luxury market is booming and still has room for some other players to come in and build a brand. Geely will assemble Volvo cars in China using cheaper manufacturing. The brand is upscale and Geely ownership might even be seen as preferable by Chinese consumers. So the company car grow sales and get fatter margins in China. That makes the business case work better than it ever did either under Ford or as an independent carmaker. After so many failed auto deals, this one has the makings of a success. Of course, it means Geely can’t manhandle Volvo. They need to rely on Ford and the Swedes for technology that will make the Chinese cars real Volvos. In short, they should manage it as...
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