Geely Is In A Hurry With Volvo
With the Volvo sale from Ford to Geely finally closed and consummated, Geely is losing no time, both in Sweden and in China.
In Sweden, Geely will “pursue investment opportunities” (read: buy other companies in part or in whole), reports Gasgoo, citing sources from the Ministry of Commerce (MOFCOM). When MOFCOM gets involved, then we are talking sizeable deals. According to the report, Geely intends to cooperate with Swedish companies in several sectors, including green cars, alternative fuels, and hybrid technology. Stefan Ostling, an auto project manager from Invest Sweden, says that Geely has already completed tie-ups with Swedish auto technology consulting firms like Semcon and HiQ through equity participation and acquisitions.
In China, Geely plans to convert a nearly completed Geely plant in southwestern China into making Volvo cars, says the Wall Street Journal. Their plan to build a special Volvo plant, along with a separate engine factory in China, remains. However, that will take time, 2 years minimum. Repurposing an existing Geely plant will deliver capacity much faster. Geely is banking on the Chinese market to bring volume to Volvo, and for that, lower cost Chinese manufacture is mandatory.
According to the WSJ, Geely is interested in adding two or three bigger, more luxurious cars to the Volvo’s lineup. These cars are to compete with vehicles like the BMW 7-series.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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Moving upscale is a good thing as it was the sale to Geely, which offers great opportunities for Volvo especially in China. Volvo made its fortunes and became a strong brand in the '70s when it was itself, standing for safety like no other brand at that time.It was not a competitor of neither BMW or Mercedes. Today, building a vehicle like the 7-series or S-class makes perfect sense but just as long as it is a Volvo and complements the other vehicles in this segment and doesn't try to be a copy of any of them. The 7 and the S are both successful because they stand for something slightly different. Neither tries to be a copy of the other.
Volvo's market share in China is microscopic. What exactly is gonna change that? Lower prices? That's it?
I don't know if this is possible, but if they could use Chinese manufacturing to save some money on production - but keep their quality like it is, they might actually have some success. Before, Ford had to keep their pricing inflated to BMW/Audi/Infiniti/Acura/etc levels to keep them aligned in the "brand structure", and almost nobody but a Volvo diehard would buy a completely outmatched Volvo instead of one of those competitors at the same prices. Bring the prices down to Mazda/VW/Subaru/etc levels though - not cheap, but a good *value* for the money - and they would find more buyers I bet.
Geely is sort of a Chinese company. Principal office is in HK, not mainland China. More importantly, it is incorporated in the Caymans. That's right, the Caymans. (Yes, I own a small pile of their stock. Perhaps a flier, perhaps not...)