Geely sells LYNK&CO Auto Sales Company

Shanghai (Gasgoo)-On Oct. 26, Geely Auto announced conditional sales of all the shares of LYNK&CO Auto Sales Company, meaning that Geely Auto will exclude the financial performance of LYNK&CO Auto Sales Company and its affiliated company from its financial report.

Previously, Zhejiang Jirun, Geely's indirect subsidiary with 99% shares held by Geely Auto, had owned the whole rights to sell the stake of LYNK&CO Auto Sales Company and its affiliated company. Now, Zhejiang Jirun had sold the total shares of LYNK&CO Auto Sales Company to LYNK&CO Investment Co., Ltd. with RMB 100 million.  

As a result, Geely Auto, a listed company, could not benefit the stock bonus entirely and directly from LYNK&CO's listing on a stock exchange. The reasons for the sale remained unknown. The following analysis may summarize two possible reasons:

Firstly, for LYNK&CO Auto Sales Company part.

Due to the short establishment of LYNK&CO Auto Sales Company and its affiliated company, LYNK&CO Auto Sales Company hadn't done any real business yet before the sale, thus it will impact Geely Auto little, but may influence Geely's revenue, according to some analyses. While Geely Auto showed its strong confidence in the sale of LYNK&CO, and also believed it will promote LYNK&CO brand to establish its sales network, marketing and after-sale services nationwide. 

On one hand, with LYNK&CO Auto Sales Company being an entity, it will have a larger scale, better brand building and promising future. On the other hand, LYNK&CO will be positioned and identified as a more independent vehicle brand, shaping a strong joint competitiveness together with Geely Auto and Volvo.

LYNK&CO had great improvement on products, management, brand, marketing and channels with the help of Geely and Volvo. The LYNK&CO 01 will hit the market, and in the future, the 02 and 03 will also be released, thus the LYNK&CO brand needs to develop independently. Geely Auto's indirect holding of LYNK&CO 50% shares will play a critical role for LYNK&CO's development.

Secondly, for Geely Auto part.

The sale of LYNK&CO Auto Sales Company indicated Geely's strong confidence in its own development. It is well known that LYNK&CO is positioned as a high-end vehicle brand between Volvo and Geely. Thanks to Volvo's cutting-edge auto technologies, the LYNK&CO is deemed as a rival for Audi and Lexus, boasting a higher price and thus a large profit compared with Geely Auto brand. But with the release of its 3.0 products, Geely Auto enjoyed a continuous brand promotion, and key indexes such as sales, revenue and net profit of Geely Auto also surged in recent years.

After its annual sales reached 760,000 units in 2016, Geely Auto delivered 827,000 vehicles during the previous three quarters this year. Thus, Geely uplift its annual sales target to 1,100,000 units from 1,000,000 units. Supported by its strong growth momentum, Geely feels confident in its future development even without LYNK&CO brand. Therefore, for Geely part, the independent development of LYNK&CO brand will not only show Geely's confidence in LYNK&CO's development, but also signify Geely's confidence and strength in future auto industry.