Goldman Hearts Geely

Edward Niedermeyer
by Edward Niedermeyer

If there’s one thing that can be counted on in the world of investment, it’s that someone is bound to copy Warren Buffett’s latest move. The Oracle of Omaha has reportedly made a billion bucks in less than a year on his $230 mil investment in BYD, and that firm’s soaring stock price has other investors taking notice. Bloomberg reports that Goldman Sachs is looking at buying $250 mil worth of convertible bonds and warrants in Geely, in hopes of repeating Buffett’s success. With major global automakers (specifically GM, VW and Toyota) solidifying their dominance of the Chinese domestic market, Chinese automakers see the low-cost segments in other markets as their opportunity for growth, and Geely is no exception. The firm hopes to boost overseas sales to 66 percent of its annual sales by 2015, a goal that justifies its current pursuit of the Volvo brand (update from Thor Johnsen coming soon). Though a name-brand backer like Goldman could help Geely break into foreign markets, there are challenges aplenty for the planned investment.

Currently, Geely’s export business is only five percent of total sales. In the short term that exposes the firm to tough competition in China, where growing sales (+14 percent in the first five months of 2009) are being offset by falling profits (-9.9 percent in the same period). Sources confirm that Goldman’s investment will free up capital to ease along the Volvo deal, but a recognizable brand may not be enough to jump-start Chinese auto exports. The WSJ reports that Chinese exports have falling without interruption since August 2008, and are down 57 percent in the first seven months of 2009. Though Chinese government officials primarily blame the global financial crisis, they say “an apparent rise of protectionism” may have played a role.

Of course that’s not the whole story. Chinese analysts say Chinese firms “lack knowledge about overseas demand, government policies, regulations and certification.”Safety and quality concerns may have played a role as well. Indeed, Geely’s new EC718, the firm’s first global model, is still waiting on European market certification. Previous results like this one won’t speed the process up either. Meanwhile, Goldman has had several Chinese investments nixed by Chinese regulators in recent years.

Though analysts are saying things like “Goldman’s investment in Geely may repeat the impact that Buffett had on BYD,” it’s by no means a sure thing. If Geely had BYD’s secret battery technology or three-mode hybrid drive, the parallels would be more apt. Instead Geely is most famous for its knock-off Rolls Royce, complete with a single rear throne ( seriously!). Don’t jump onto your Ameritrade account just yet . . .

Edward Niedermeyer
Edward Niedermeyer

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  • ZekeToronto ZekeToronto on Sep 22, 2009

    Considering how quickly South Korea managed to replicate the Japanese manufacturing quality / reputation turnaround, I would not bet against the Chinese. They have excellent role models and more capital than those role models had with which to pull it off.

  • D002 D002 on Sep 23, 2009

    hey I like that car - Crassy !

  • Wolfwagen What I never see when they talk about electric trucks is how much do these things weigh and how much does that detract from the cargo-carrying capacity?
  • Wolfwagen I dont know how good the Triton is but if they could get it over here around the $25K - $30K They would probably sell like hotcakes. Make a stripped down version for fleet sales would also help
  • 3SpeedAutomatic You mentioned that Mitsubishi cars had lost their character. Many brands are losing that that element as well. GM is giving up on the ICE Camaro and Dodge on the ICE Challenger. There goes the Bad Boy image. Might as well get your teeth pulled and dentures put in place. Would like to see a few EVOs with cherry bomb exhaust and true 4 cylinder BIG blower turbos; 4 wheel drift capacity is mandatory!!🚗🚗🚗
  • Tassos Here in my overseas summer palace, I filled up my tank twice in May, at 68 and 52 euros (a full 90+ liter tank fillup has taken 130-135 Euros in the past, and I am 23 miles from downtown here, while only 1-2 miles in the US)Still, diesel here is MUCH cheaper than gas. Yesterday, I paid 1,488 a liter while gas was at least 1,899 (regular).Multiply by almost 4 for gallons AND by an additional 1.1 for $.
  • 3SpeedAutomatic IIRC, both China and the EU use a standardized charger connection. About time the US & Canada to follow.Would take some of the anxiety out of an EU purchase and accelerate adoption. 🚗🚗🚗
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