The "Code" of Geely's Transformation and Upgrading | Cover Story: The Globalization Of Chinese Car Companies (4)

Geely's brand and technology strategy has, to some extent, given it a rapid boost to its development in recent years. In the current new era with the domestic cycle as the main body and the domestic and international dual cycles promoting each other, Geely will transform and upgrade high-quality development and build brand and technical strength.

Geely has been a multinational automotive group for 12 years since its acquisition of Volvo Cars in 2010. From the "snake swallowing elephant" that was not optimistic at that time, to the multi-brand combination of Geely, Lynk & Co, Extreme Kr, Geometry, Volvo, PoleStar, Proton, Lotus and so on, Geely is building a brand development matrix of "strategic synergy, promoting change and creating value".

This process is clearly fraught with risks. In fact, the coordination between brands is becoming a long-term problem that has plagued the auto giants. In the last century, GM and Ford both implemented a number of brand management structures, with more than 10 brands, but after a series of integration contradictions, both are now implementing a contraction strategy. Looking at the world, the only thing left today that is similar to the development route of Geelyduo brands is Volkswagen and the nascent Stellantis Group, how to reasonably distribute brands of similar levels to different levels to avoid mutual internal friction, which is becoming a "barrier" that Geely must face to globalization.

On March 23, Geely Automobile announced its 2021 financial report. In terms of finance, Geely Automobile increased its revenue by 10.3% to 101.6 billion yuan in 2021; the profit attributable to shareholders after deducting share payment was 6.06 billion yuan, an increase of 9.4% year-on-year; and the net profit was 4.35 billion yuan. At the same time, Geely Automobile's total cash flow reached 28 billion yuan, a record high. Li Donghui, CEO of Geely Holding Group, said at the performance meeting that high-end research and development and technology licensing have become a new profit growth point for Geely Automobile. It is reported that in 2021, Geely Automobile's technical licensing and R&D services have achieved revenue of 4.5 billion yuan, an increase of 245% over the previous year. Among them, the technology licensing revenue was 1.275 billion yuan, an increase of 125% year-on-year. The source of income includes technical licensing and R&D services of volvo cars, Polestar, Proton, Lotus, smart and other brands under the holding group, as well as external cooperation companies Waymo and Renault, which greatly improve the efficiency of research and development and produce a large-scale coordination effect. Judging from the financial report information, Geely's "pass-through" process is still relatively smooth, and it has shifted from multi-brand product output to technology output, and calmly responds to global development with a more diversified profit structure.

Ascending concept

At that time, when Geely took over Volvo Cars from Ford for $1.8 billion, its annual sales were hovering around hundreds of thousands of vehicles, and it had not yet entered the first echelon of Chinese car brands. The net loss of Volvo, which cost a huge amount of money to acquire, was 5.19 billion Swedish kronor, which looks like a typical case of indigestion after "snake swallowing elephant". But Li Shufu, the actual controller of Geely, believes that the acquisition will bring infinite benefits to Geely, and he said that the new energy technology that Ford and Volvo have spent tens of billions of dollars to research for more than a decade is worth the "fare". On the other hand, he believes that the acquisition of Volvo is to open a channel for Chinese cars to go global. "The automobile industry must be a globalized industry, and if you don't want to sit in the well and watch the sky and build cars behind closed doors, you must absorb advanced concepts and technologies to enhance the competitiveness of enterprises."

The three-tier governance concept is a lesson learned in the process of Geely's globalization. "In accordance with the three-tier governance structure of shareholders' meeting, board of directors and management, Geely has established a foundation for synergistic development with Volvo and explored forward for common business goals." Song Zhaohuan, general manager of the brand communication center of Geely Holding Group, said in an interview with Auto Zongheng. Relying on this concept, both Geely and Volvo have achieved greater brand influence through clear responsibilities and responsibilities in operation and management, resource synergy, results sharing and efficiency maximization.

Song Zhaohuan, General Manager of Brand Communication Center of Geely Holding Group

Let's start with Geely. In April 2021, Geely became a member of the IATF International Automotive Working Group, participated in the development of international quality standards, and has the right to vote as directors. Fu Bingfeng, Executive Vice President and Secretary-General of the China Association of Automobile Manufacturers, said: "Geely's participation in the IATF is a milestone and will make more Chinese voices in the formulation of international quality standards and help the sustainable development of China's automotive industry chain. In addition, in the list of "Top Ten Automobile Groups with the Highest Brand Comprehensive Value" released by brand finance, Geely Holding Group ranked ninth, becoming the only Chinese automobile group on the list. After achieving the listing, Volvo is even more "rising", which is favored by global institutional investors and the public.

Of course, Geely learned more than just management concepts that are appropriate for global development at Volvo. "Geely brings value to Volvo, who is also a teacher, providing us with a wealth of advanced experience in quality control, operations management and R&D technology." Song Zhaohuan added. In addition, Geely also exchanged talents with Volvo through the group's internal mechanism, hired excellent Volvo talents to play a role, and also sent Geely talents to the China-Europe Technology research and development center (CEVT) in Europe for training and complementary advantages.

The towering tree started from a small seedling, and it is undeniable that the successful operation of Volvo has provided Geely with a solid credit and strength endorsement, and has also made Geely more "smooth sailing" in the follow-up overseas investment and mergers and acquisitions. In 2017, Geely signed a contract with DRB-HICOM Group to acquire 49.9% of Proton Automobile and 51% of Lotus Group's shares for a transaction price of about RMB1.17 billion. One is the only mature vehicle manufacturer in Southeast Asia, and the other is a luxury sports car brand, which has allowed Geely's automotive landscape to be extended again.

Technology gains

In the face of increasingly lush diversified group branches, Geely has moved from pure product trade "going out" and localized production and operation to a new overseas layout stage. "The main work policy at this stage is strategic synergy, we strive to introduce capital, technology and talents in an all-round way, and hope to achieve a breakthrough in the development of Geely through better integration and development." Song Zhaohuan said.

According to Song Zhaohuan, the first is the full cooperation between brands. Although Geely's brands are independent of each other and have different directions around user groups and brand positioning, they share the group's resources to the greatest extent in basic technology research and infrastructure development. Among them, the CMA basic module architecture is a typical case. In 2016, the CMA basic module architecture was born in CEVT, Gothenburg, becoming the mid-level car basic standard for Volvo and Geely to cope with global Industry 4.0, and today, this architecture has been applied to Volvo, Geely, Lynk & Co and other brands. This makes it possible for different brands to have different requirements for model chassis, power requirements, and electrical and electronic architecture, but the unified foundation makes the cycle of model production and development much lower, and it can be more flexible to respond to the different needs of market segments. "This has a long-term gain for us, whether it is to create a unique value brand or to meet the personalized needs and experiences of users."

The Lynk & Co brand is also a beneficiary of technology sharing, and the Lynk & Co model adopts the Volvo SPA architecture and the CMA basic module architecture and powertrain jointly developed by Geely Volvo, and also realizes the joint procurement of parts. All of this has allowed Lynk & Co to develop rapidly. In 2021, Lynk & Co sold more than 220,000 vehicles in the whole year, refreshing the record of the highest annual sales of the Lynk & Co brand, with an average weighted transaction price of 165,000 yuan, successfully standing in the core area of the mainstream market. Geely's independent "China Star" series, the total sales last year also exceeded 200,000 vehicles, achieving the upward development and value leap of the Geely brand.

The focus on product technology is boosting Geely's global layout. In September 2020, Lynk & Co's European strategy was launched, and the subscription-based business model was innovatively adopted, and as of February 2022, Lynk & Co has more than 80,000 "subscription-based" member users. Its "Asia-Pacific Strategy" was also launched in the Middle Eastern country of Kuwait in November last year, and Lynk & Co chose to cooperate with Al Zayani Group and develop the market according to the "distribution" model of local customs, creating the first Official Co:Club Owners Club in the Asia-Pacific market, and evolving a new user ecosystem around the Co:Talk and Co:Partner programs. As of February 2022, Lynk & Co's overseas shipments have reached 16,000 units. Song Zhaohuan said: "Collaborative development, collaborative procurement, shared architecture, shared production capacity and other strategic cooperation, so that Geely to improve efficiency as much as possible to maintain technological leadership, while in the development of global development has a flexible and proactive response strategy." ”

In his 2022 New Year's address, Li Shufu said: "We don't want to be subverted by the world, we must be ahead of the layout." In a series of expansion layouts, Geely is becoming more and more comfortable on the road of globalization through the strengthening of corporate endogenous forces such as business philosophy and technological change. In the face of the future of electrification, "Smart Geely 2025" will promote Geely's development in the direction of technology-led global car companies, at that time, with the gradual formation of a full-stack self-developed ecosystem in core technologies such as new energy, automatic driving, intelligent networking, and intelligent cockpit, it may play a good hand at the table of global competition.