Geely's new brand eyes Tesla retail playbook

BERLIN -- Geely Automobile's new global brand, Lynk & Co., will mount a Tesla-like challenge to the U.S. franchised dealer system as it pushes for 500,000 annual global sales within five years.

Plans for the 2018 U.S. launch of the first vehicle -- a compact crossover developed with Geely-owned Volvo Car Corp. -- are far from complete. But initially Geely foresees:

n Retail sales and delivery of Internet-bought vehicles via a network of company-owned dealerships.

n A strong effort to maximize online sales.

n Service and parts through the existing Volvo dealer network or independent chains. Both Lynk parent Geely Automobile and Volvo Cars are owned by China's Zhejiang Geely Holding Group.

"We will discuss with various states our distribution model that is efficient, offers better prices for consumers and creates jobs, and we are open to listen," Lynk Senior Vice President Alain Visser said in an interview at the brand's unveiling here on Thursday, Oct. 20.

Visser said Lynk's first target in the U.S. is California and Florida could be the second state where the new brand -- whose models were designed and engineered in Sweden and will be built in China -- is sold. The brand will be launched in China late next year and in Europe in 2018.

Research shows that about 10 percent of U.S. and European customers are eager to buy their next car over the Internet, but less than 2 percent do it, Visser said. For that reason, Lynk will need significant market coverage with company-owned dealerships, which also will deliver cars bought on the brand's website, he said.

Visser: In U.S., California first.

500 European stores

Visser said it is too early to estimate how many company-owned dealerships Lynk will need but the company plans about 500 sales points in Europe. Adding Lynk service work would aid Volvo stores, he said.

"Aftersales revenues are declining at any brand, Volvo included, so servicing Lynk cars will permit a higher fixed cost absorption for Volvo dealers, as well as lower investments for Lynk," Visser said.

Lynk cars will be picked up for servicing and delivered directly to the owner, he said.

Visser said the business model of selling and servicing cars has not changed much in the past 100 years while consumer expectations now are totally different from just 10 years ago.

Lynk wants to own its dealerships to reduce distribution costs and ultimately prices for the customer while keeping full control of its relationship with the customer.

"The current car distribution model is broken," Visser said. In his view, automakers design, engineer and build cars but then "outsource" their sales to dealers, losing their grip on the portion of the distribution process crucial for brand-building as well as for margins.

Asked about Geely's strategy, Jonathan Collegio, senior vice president of public affairs for the National Automobile Dealers Association, said: "Franchised dealers provide the best way of selling and servicing new vehicles for consumers, manufacturers and local communities. This is why states across the country have adopted the franchise model for consumers to purchase and service their vehicles. We would expect Geely, if and when it enters the U.S. market, to follow these and all consumer protection laws when they do business."

Horbury: Leads Lynk car design

Fixed prices

Lynk will offer fixed prices, which would be the same for Internet and physical sales.

The brand also will keep prices low by offering a limited number of trim versions, called collections, rather than base models with a long list of options.

Visser said that in the U.S. and Europe each model will have about 10 variants. There will be no options, and even the color will be standard for each variant.

Collections will change frequently, possibly in spring and fall, he said. Lynk will abandon the model-year concept, which Visser called "outdated."

The brand has been called Lynk to emphasize that its cars will offer a high level of connectivity, including the possibility for owners to earn money by sharing their vehicles with others.

Lynk is collaborating with Microsoft and Alibaba to build a digital customer infrastructure for the car industry, with new digital order, supply, sales and customer-relationship management systems and custom applications for user interaction.

Lynk's cars have been designed under Geely design chief Peter Horbury, a former top designer at Ford and Volvo.

Lynk will offer 1.5-liter, three-cylinder and 2.0-liter, four-cylinder gasoline engines that it will build in China under license from Volvo. The U.S. and Europe will probably get only greener powertrain variants, including a hybrid and a plug-in hybrid. A full electric model is expected around 2019.

The Lynk 01 is based on the Compact Modular Architecture platform developed by Geely and Volvo in Sweden. Volvo will use the platform to renew its 40 compact range previewed in May by the 40.1 and 40.2 concept cars. The 40.1 compact will become the XC40 for production and is set to debut at the end of next year.

Lynk plans to add a compact sedan and other models to its lineup.