By on February 27, 2021

volvo emblem logo grille

Despite having already having Volvo Cars as one of its many subsidiaries, China’s Geely signaled roughly a year ago that it wanted to merge with the brand as part of its strategy to expand globally. Plans changed on this week when the company announced that the duo will be retaining their independent corporate structures, though they will continue working on a joint development program for electric vehicles.

This means more backing for the Lynk & Co. brand, a technology-focused joint venture Geely launched with Volvo in 2016. Lynk is hoping to bridge the gap between traditional vehicle sales and subscription-based models, while also pioneering telematics and other connected services that look like an invasion of privacy to some and a technological breakthrough to others. Regardless, the industry as a whole seems convinced this represents the evolution of the automobile and a stable source of revenue for companies capable of monetizing large amounts of data — often with the help of the world’s largest technology firms. 

In a recent interview with Automotive News, Volvo CEO Håkan Samuelsson indicated that it wasn’t Volvo’s decision to dissolve the merger. But he did suggest that it was likely for the best, hinting that investors weren’t as keen on the idea as Geely was. At over $8.6 billion (USD), the Swedish brand is valued exceptionally high for its size. Reports from a Citi analysis claimed that important shareholders of the Chinese company expressed concerns that Volvo might be overvalued and could dilute their take. There were also claims that the pair had conflicting corporate cultures. Samuelsson did little to downplay either scenario.

“The valuation only matters on the day that someone is ready to pay,” he explained. “That being said, if you are bringing something in, then you have to determine the valuation and that could lead to endless discussions. But if you keep the companies separate, they can be evaluated separately. I think the capital markets see that as an advantage.”

Ultimately, he believes both companies would be better served by continuing to collaborate on EVs and software development. When asked about the cost benefits of combining efforts on those programs, instead of a going through with a traditional merger, he made it clear the tech stuff mattered most to Volvo — even if it wasn’t obvious to outsider eyes.

“They are so important but they are difficult to measure,” Samuelsson said. “If you are focused on hardware, then you could say, ‘OK, now I buy twice the volume of this shock absorber and I get 8 percent cost saving.’ It is very easy to measure. But if the synergies mean you will get something such as the Auto Pilot to market six months faster than expected and it’s better than if you did it alone, how do you value that? Unfortunately, I cannot quantify that as easily as with something more traditional.”

[Image: Volvo Cars]

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14 Comments on “Geely Nixes Volvo Merger, Volvo CEO Explains...”

  • avatar
    DC Bruce

    It would be nice if Volvo could build vehicles that don’t compete with JLR for last place in reliability ratings. I find their designs — especially the interiors — to be very attractive. And, for decades, Volvo has had the most comfortable seats around. But, as one would expect, their turbocharged, supercharged, hybrid power system is, apparently, a nightmare of complexity.

    • 0 avatar

      That’s what a warranty is for, and an extended warranty if you plan to keep it longer.

      So far, no issues of note with our 2nd gen XC60. Our 1st gen one did end up having some issues regarding a squealing belt that was fixed under extended warranty. Kept that one until we were north of 90,000 miles.

      • 0 avatar
        Art Vandelay

        I have had many a lease for such cars as you describe. Unless you own another car (I did) it can be a real pain taking your car to the dealership all the time and having them hang on to it for a week or so.

        Our local Volvo dealership is now kind of like our local FIAT/Alfa dealership. They have 2 or 3 of the cars that are on the dealership sign and a bunch of used cars. The Volvo place is owned by the folks that run the Porsche and BMW dealership it sits between. Any of the non-certified cars seem to end up there with 5 or so Volvos out front. I do like their seats though.

    • 0 avatar

      I can imagine it might be, but that’s … only the T8 drivetrain.

      (I am glad my XC70 is the old fashioned straight-6 T6, but even the new one that’s just a double-boosted straight 4 shouldn’t be that bad.

      It’s not like that’s new or that weird – VW’s been doing it in Europe since 2005?

      It’s only a little more complicated than just one or the other; it’s adding a full hybrid system that makes a drivetrain really complex.)

    • 0 avatar

      Where can I find this empirical info? We’re in the market now and the XC60 is on our list.

      For example, how does a 3 yr old XC60 compare to an equivalently priced Q5, X3, RX350, etc, from a reliability perspective?

      The problem seems to be that we don’t yet know how (un)reliable these Volvos will be in the long run. They haven’t been available for long enough to know post 90k miles what types of repairs will be common.

  • avatar
    schmitt trigger

    This is a sincere question;

    What is the difference between a “subscription based model” to a traditional vehicle lease?

    • 0 avatar
      Art Vandelay

      The subscription model costs more and you don’t ever get the option to just buy it out should you like the car enough to want to keep it. Therefore it is better for the OEM.

      • 0 avatar

        Art, the subscription models also usually allow you to swap between cars. So, you have an S60 for most of the time and then swap for an XC90 when you’re going on a road trip, or whatever. Not sure how many people actually take advantage of that, but it’s a difference vs. a normal lease.

        • 0 avatar
          Art Vandelay

          I want a subscription to a service that lets me choose from 90’s cars lol. I will daily the economical B-13 SE-R. Got a nice drive through the twisties? Let me grab an FD RX-7. Family Trip? An Eddie Bauer Explorer maybe? OK, there may be a hole in this plan.

  • avatar
    SCE to AUX

    Keeping the companies separate is also a clean way to isolate the losses when “mobility” is found to have no ROI.

    I’d say this is an ominous development for Lync & Co.

    • 0 avatar

      That is definitely an advantage, keeping conventional vehicle production separate from development of electric powertrains. Development costs can get out of hand, with no certainty that the results will be any cheaper than existing battery technology.

      That’s the key to BEV adoption: lower cost batteries made with readily available materials. Otherwise current battery technology will add thousands to the cost of otherwise lower cost vehicles, and there still might not be enough battery production to meet demand, due to materials bottlenecks.

  • avatar
    el scotto

    Full size trucks more easily accommodate the gentlemen whose waistline has expanded with his responsibilities.

  • avatar
    Art Vandelay

    What a pile.

  • avatar
    Art Vandelay

    A true pile of sheite

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