Wheels of Change: the Story of Zhejiang Geely Holding Group（Part 1）

This year has seen a lot of good news for Zhejiang Geely Holding Group ("Geely Holding").

On the one hand, Geely Auto released its financial reports of 2023, achieving a revenue of ￥179.2 billion, a year-on-year increase of 21%, and a net profit attributable to shareholders of ￥5.308 billion, a significant increase of 51% compared to 2022, demonstrating a significant improvement in profitability.

On the other hand, Lotus Technology and Zeekr have successively listed in the U.S., making Geely Holding’s Chairman Li Shufu the proud owner of 9 listed companies. Polestar managed to secure $950 million in external financing despite the downturn market. Additionally, struggling automaker ZHIDO recently announced the completion of a capital strategic restructuring.

With a combination of industrial prowess and financial acumen, Geely Holding has formed a strong market influence and competitiveness.

Brands under Geely Holding; Photo credit: Geely Holding

Hi, this is Gasgoo. In this episode of "Wheels of Change: Stories of Chinese Auto Giants," let's talk about the industrial capital hunter - Zhejiang Geely Holding Group.

M&A and IPO Frenzy: Geely Holding’s Path as a Capital Hunter

It’s said in the industry that "a history of Geely Holding’s development hides half of the history of capital mergers and acquisitions." This remark is true.

Starting from the acquisition of Volvo Cars over a decade ago, Geely  Holding has now become a shareholder in world-class companies such as PROTON, Daimler, Lotus, and Aston Martin, among others, and this is only a part of the whole picture.

The acquisition journey of Geely Holding began in 2006 when it joined Shanghai Maple to acquire a 19.97% stake in Manganese Bronze Holdings, the owner of London Taxi Company.

But it was the Volvo deal that made the biggest splash. In 2010, Geely  Holding acquired the entire share capital of Volvo Cars from Ford Motor for just $1.8 billion, whereas Ford had purchased Volvo for $6 billion.

From that point on, Geely Holding embarked on a journey of industrial capitalization, leaving its competitors far behind.

In 2017, Geely Holding acquired a 49.9% stake in PROTON, a Malaysian carmaker under DRB-HICOM, and used this acquisition to secure a 51% stake in Lotus Cars, a British luxury sports car brand controlled by PROTON, for £51 million. 

In the same year, Geely Holding also completed the acquisition of Terrafugia, a U.S.-based flying car company.

In 2018, Geely Holding spent $9 billion to acquire 9.69% of the voting shares of Daimler AG, the parent company of Mercedes-Benz, in the secondary market through its overseas business entity, becoming the largest shareholder of Daimler at that time.

In 2022, Geely Auto announced to subscribe to a 34.02% stake in Renault Korea Motors for ￥1.376 billion. 

In the same year, Geely formally acquired Meizu Technology, holding a 79.09% controlling stake through its subsidiary Xingji Technology, and gained sole control over Meizu Technology.

Over the years, Geely Holding’s investment portfolio has continued to expand, encompassing numerous brand assets. Through new capital operations, it has also successfully launched several IPOs. 

Prior to Lotus, Geely Holding already had Geely Auto listed on the Hong Kong Stock Exchange, QJMOTOR, Hanma Technology, and Lifan Technology listed on the A-share market, and ECARX, Polestar listed in the U.S. and Volvo Cars on the Swedish stock market.

Not only that, a number of other companies under the Geely umbrella are also actively seeking to go public.

In 2023, RADAR, Geely Holding's first pure electric pickup brand, said that its listing on the capital market is a confirmed plan, and the company will follow the normal process to IPO at an opportune time.

Farizon Auto, a new energy commercial vehicle brand under Geely, is also considering a U.S. IPO.

Xingji Meizu also said that it is actively preparing to go public in Hong Kong, aiming to submit an application to the Hong Kong Stock Exchange for listing in the second quarter of 2024 at the earliest.

In other news, it was reported that Cao Cao Mobility, a ride-hailing platform backed by Geely Holding, is expected to list in Hong Kong as early as April this year, having already raised ￥5 billion.

Recently, Geely Auto adjusted its equity structure, transferring the equity of Livan Auto to Geely Qizheng. This move has led to speculation that Geely is preparing Livan Auto for an independent listing in the future.

The equity change of Livan Auto; Photo credit: Geely Auto

While not all of Geely Holding' s acquisitions and IPOs have been successful, such as Hanma Technology recently applying for bankruptcy reorganization, and the outcomes of other companies under Geely planning to go public are still uncertain.

However, there is no denying that Geely Holding, or rather Li Shufu, can be considered a master of capital operation based on cases like Volvo Cars and PROTON.

Since its listing in Sweden in October 2021 under Geely's management, Volvo Cars' sales have more than doubled in 13 years.

In 2023, Volvo's global sales reached 708,700 units, with revenue increasing by 21% year-on-year to SEK 399.3 billion (approximately ￥275.9 billion), hitting a record high.

In terms of market value, the acquisition of Volvo over the past decade has allowed Geely Holding to reap tens of times the return.

"It's like a poor boy from the countryside going after a top star in the world," Li Shufu said of the acquisition at the time.

From the later facts, the “poor boy”Geely “marrying a wealthy beauty”has indeed reached the peak of life.

Not only Volvo, PROTON has also made a turnaround after entering the Geely system.

Due to the slow technological turnover, PROTON experienced its darkest moments, with not only declining sales but also consecutive years of financial losses. After being acquired by Geely Holding, the situation has gradually reversed.

In 2019, PROTON's sales exceeded 100,000 units. In 2023, PROTON's global sales reached 154,611 units, an increase of 9.3% year-on-year, achieving its best performance since 2012 and winning the runner-up in the Malaysian automotive market for the fifth consecutive year.

Moreover, with the new stage of Chinese cars going overseas, Malaysia will become a crucial part of Geely's global map.

Cross-border mergers and acquisitions are not easy tasks, as they involve not only political risks in different countries but also economic, legal, financial and operational risks.

The growth and development achieved by Geely Holding through its acquisition strategy is obviously not due to simple luck, but more from Geely's overall industrial strength and adept capital operation. 

Behind Geely Holding's investment portfolio lies its global expansion

Geely's ambition for acquisitions was originally motivated by an urgent need for technology. 

In 1997, Geely officially entered the automobile industry, starting with reverse engineering from the imitation of Tianjin FAW Xiali Automobile.

However, in the context of the relatively backward technical level of China's automobile manufacturing industry at that time, Geely encountered bottlenecks in improving product quality.

Faced with this dilemma, Li Shufu turned his strategic focus to overseas mergers and acquisitions, hoping to achieve technological breakthroughs and upgrades by acquiring foreign car companies with advanced automotive manufacturing technologies.

The most substantial, of course, is the acquisition of Volvo Cars. Although Geely also spent a lot of time and effort to gradually digest and absorb Volvo's technology for its own use, this move had a profound impact on Geely.

Signing ceremony for Geely's acquisition of Volvo Cars; Photo Credit: Geely Holding

In 2013, Geely and Volvo jointly established the China Euro Vehicle Technology AB (CEVT) and developed the Compact Modular Architecture (CMA) that underlies almost all of Geely's current popular models.

In the subsequent close cooperation with Volvo, Geely has also incubated the Lynk & Co brand and jointly created the SEA architecture, the first pure electric exclusive architecture of Geely.

It can be said that through the acquisition of Volvo Cars, Geely embarked on a substantial transformation, not only enabling Geely to gain a firm foothold in the Chinese market, but also accelerating its pace of globalization and achieving the leap from a local small enterprise to an international one.

It is also the beginning of Geely's move from capital export to  technological export. In subsequent overseas acquisitions, Geely began to export its technology. 

In the case of Geely's acquisition of PROTON, the platform of Geely Boyue was injected into PROTON at a price of 290 million ringgit. That is to say, in addition to cash, Geely also used technology as capital to exchange for shares, and this part of the value even exceeded the cash transaction part.

Signing ceremony between DRB-HICOM and Geely Holding; Photo Credit: Geely Holding 

After Geely acquired a stake in Renault Korea Motors, the two sides also use the CMA architecture and the NordThor hybrid technology to produce cars.

If the acquisition of Volvo Cars truly propelled the Geely brand onto the world stage, then through subsequent overseas acquisitions and the integration of overseas subsidiaries' resources, Geely has continuously expanded its product influence to global markets.

In 2023, Geely Auto Group's cumulative export sales reached 274,100 units, a year-on-year increase of over 38%, with multiple brands accelerating their layout in overseas markets.

By the end of 2023, the Geely brand has established 533 sales and service centers in 70 countries worldwide, continuously expanding the global market.

The Lynk & Co brand has opened 11 offline experience stores in six European countries and making progress in the Asia-Pacific market.

Zeekr has completed its global journey from "0 to 1" and has entered a total of 12 international mainstream markets.

According to the plan of Geely Holding, each of its brands' overseas layouts has different focuses.

The Geely brand will focus on Eastern Europe, the Middle East, Southeast Asia, Africa, South America, and other countries along the Belt and Road Initiative, establishing over 600 overseas sales outlets and entering the new energy markets in Europe and Asia-Pacific.

The Lynk & Co brand will focus on Eurasian countries, in addition to opening up new markets such as Israel, Saudi Arabia, Oman, Qatar, Macau, and Vietnam, the brand will also accelerate its entry into Southeast Asia and Latin America and other potential markets in the future.

Zeekr will accelerate its entry into Europe, the Middle East, and Asia. According to the plan, Zeekr will expand its coverage in the European market to six countries by 2024, further enter eight countries by 2025, and achieve coverage of most core countries in Western Europe by 2026.

PROTON aims to become the number one car brand in Malaysia and one of the top three in ASEAN, with the potential to radiate into neighboring markets such as Thailand and the Philippines. In the new globalization process, Malaysia will become even more strategically valuable.

According to the forecast of Gasgoo Auto Research Institute, China's passenger car exports are expected to reach 4.86 million units in 2024, an increase of approximately 720,000 units compared to the previous year, with BYD, Chery, Geely, and SAIC being the main drivers of export growth. According to the plan previously released, the overseas sales target for Geely in 2025 is 600,000 units.

Nine ambitious initiatives under Smart Geely 2025 Strategy; Photo Credit: Geely Holding

Continuously expanding circles, Geely Holding aims to build an integrated "sky and ground" mobility ecosystem

In addition to acquiring automotive brands globally, Geely Holding's investment portfolio also involves the upstream and downstream of the automotive industry chain, and has even expanded to a broader level.

In recent years, Geely Holding pursues electrification transformation through equity investment, joint ventures, and independent research and development. The group focuses on battery technology innovation, battery materials, charging and swapping operations, photovoltaic green electricity, recycling, and other areas, collaborating with the whole industry chain to form an ecological layout.

In 2013 and 2017, Geely Holding established VREMT companies in Suzhou and Ningbo, respectively, specializing in providing battery pack products for brands under Geely Holding. 

The group has also invested in battery manufacturers such as WeLion New Energy Technology, Hengyuan New Energy Technology and Farasis Energy. 

In 2014, Geely Holding indirectly acquired stakes in two battery factories through equity acquisition of Honbridge, formally engaging in battery production business.

In 2017, Geely Holding fully acquired the production equipment and the rights to use the manufacturing technology intellectual property of LG Chem Nanjing Plant, with LG Chem assisting in upgrading the battery technology for Geely's high-end brands, including Volvo.

In 2018, Zhejiang Jirun, a holding company under Geely Auto, invested ￥490 million to establish a joint venture with CATL, named CATL-Geely Power Battery Co., engaging in the research and development, manufacturing, and sales of battery cells, modules, and packs.

Additionally, Geely Holding indirectly controls Sunshine Mingdao Energy Technology Co., Ltd., and has jointly established Fujian Evergreen New Energy Technology Co., Ltd. with BASF Shanshan and Zijin Mining. The two companies are involved in battery recycling, battery leasing, and other related areas.

Geely Holding is also branching out into battery swapping. Since 2017, it has been deeply involved in the battery swapping business, establishing an ecosystem that integrates the development of vehicles with swappable battery, the operation and development of battery swapping facilities, and mobility services.

As the auto industry enters the era of intelligence, Geely Holding is  gradually building a comprehensive and extensive smart ecosystem.

In terms of intelligent car, Geely Auto adopts a combined strategy of self-research and collaborative development. Its subsidiary, ECARX, serves as an important strategic partner for Geely Auto in advancing intelligent technology. ECARX focuses on three core areas: in-car chips, smart cockpits, and autonomous driving.

Photo credit: ECARX

Founded in 2016 by Li Shufu and Shen Ziyu, ECARX has secured several rounds of financing and established deep partnerships with Geely and Baidu in intelligent cars.

Currently, the GKUI (Geely Smart Ecosystem) installed in Geely vehicles is custom-developed by ECARX. Furthermore, through ECARX, Geely Auto has collaborated with external resources to establish Smart-Core Holdings and SiEngine Technology, further expanding its presence in automotive chips.

Li Shufu believes that end-to-end connectivity is an inevitable trend in the IoT era. The advancement of smartphones can drive the development of in-car systems, and the improvement of in-car systems can continually enhance the level of smart cockpits, thereby boosting the competitiveness of smart electric vehicles. This is one of the main reasons why Geely acquired Meizu Technology in 2022.

Geely's venture into smartphones aims to build a comprehensive ecosystem. Li Shufu once highlighted that the smartphone business holds significant importance for the entire Geely automotive industry.

"It can connect to the Internet of Vehicles and satellite Internet, creating rich consumer scenarios and strengthening the ecosystem," he said.

Additionally, in the field of car-sharing, Geely has formed three platforms, CaoCao Mobility for economic travel, StarRides for high-end mobility services, and the Limao Chuxing, which can achieve full coverage from daily commuting to high-end business travel.

Geely's ambition does not stop there, and it ultimately wants to build a a multidimensional mobility ecosystem that integrates sky and ground, from ground travel to low-altitude travel, from the development of vehicle networking systems, in-car chips to the deployment of LEO satellites.

This brings us to Geely Holding's acquisition of Terrafugia. The key to acquiring Terrafugia was to make a strategic move into the flying car sector, establishing a long-term presence and positioning in the field of three-dimensional travel.

In 2018, Geely strategically invested in Zhejiang Geespace Technology Co., Ltd., becoming the first Chinese automaker to independently develop low-orbit satellites. This investment covers the entire industry chain, from R&D to manufacturing, measurement, control, and application.

Based on this, Geely began to establish an integrated mobility ecosystem encompassing both ground travel and satellite capabilities. Thus, Geely has become the world's second and China's first automaker to simultaneously produce both cars and satellites, following Tesla.

Photo credit: Geely

In February this year, the second orbital satellite of Geely Future Mobility Constellation was successfully launched at the Xichang Satellite Launch Center. 

Developed and constructed by Geespace, Geely Future Mobility Constellation is the world's first commercial constellation integrating communication, navigation, and remote sensing, and is the core of Geely Holding's strategy to deploy low-orbit satellites and establish an integrated mobility ecosystem.

Geely's efforts in low-orbit satellites will directly empower its automotive business, particularly in areas such as intelligent navigation, satellite communication, and autonomous driving.

In fact, Zeekr 001 FR, Zeekr 007, and Geely Galaxy E8 have already supported satellite communication, claiming to achieve "perpetual connectivity" . 

For vehicles, satellite communication systems can provide centimeter-level high precision vehicle navigation and positioning, which significantly empowers the development of autonomous driving technology.

The commercial potential derived from this technological empowerment not only promises to create a lucrative revenue stream for Geely but also unleashes tremendous value and potential in the capital markets.