Text | Little Lou Fish
Edit | Yang Xuran
The news of Geely Holding's recent plan to sell all of its Class B shares in the Volvo Group is gradually fermenting, and according to market estimates, this part of the shares is equivalent to about 9.63 billion yuan. Affected by this news, Volvo's stock price has fallen significantly, and the decline has reached 14.6% in the past month.
In fact, since the beginning of the year, Geely Holding has reduced its shareholding in the Volvo Group for several months, accumulating more than 7 billion Swedish kronor, reducing its stake from 8.2% to 6.8%. After completing the reduction of all Class B shares, Geely Holding can still rely on the 88.5 million Class A shares of Volvo Group in its hands to firmly occupy the second place.
Geely Holdings' explanation at the beginning of the year was that it was mainly to obtain cash to repay the bonds. Now Geely's rationale has changed to a strategic realignment – the inclusion of the Volvo Group in its car manufacturing and investment portfolio is "part of the group's risk management and diversification strategy." ”
Of course, the market is more curious about Geely's arrangement of Volvo cars. After all, the Volvo Group is mainly engaged in trucks, buses, aerospace, construction and other businesses, and Volvo Cars, which operates independently, is the one that is more strategic to Geely.
Although Geely Holdings reduced its stake in Volvo Cars from 82 percent to 78.7 percent in November, the two companies also face direct competition for their electric vehicle businesses.
At the moment, the likelihood of Geely completely selling Volvo cars is very low. It's just that Geely's long-term development strategy no longer has to rely on Volvo to complete.
01 Profit
In 2023, Geely Automobile will exceed its sales target, with a total annual sales volume of 1.687 million units, of which the sales of new energy vehicles will reach 487,000 units, a year-on-year increase of 48%, accounting for 30% of the group's overall sales.
From January to March 2024, Geely Automobile sold a total of 476,000 units, a year-on-year increase of 47.5%, of which 144,000 new energy vehicles were sold, a year-on-year increase of 130.9%.
In 2023, Geely Automobile's revenue will reach 179.2 billion yuan, a year-on-year increase of 21%, a record high, and the net profit attributable to the parent company will reach 5.308 billion yuan, a year-on-year increase of 51% compared with the net profit attributable to the parent company in 2022 after excluding the benefits of one-time premium acquisition.
Geely Automobile has continued to increase investment in the development and production of new models, and strengthened its brand matrix by acquiring or participating in Volvo, Proton, Lotus, Daimler and other car brands, which has kept Geely Automobile selling well for many years, but it has also brought a lot of financial pressure to the company.
From 2020 to 2023, Geely Automobile's total liabilities will be 46.602 billion yuan, 64.120 billion yuan, 81.631 billion yuan, and 107.446 billion yuan respectively, and the debt ratio will increase from 42.05% in 2020 to 55.79% in 2023. In 2023Q3, its asset-liability ratio is as high as 68.95%, which is only one step away from the internationally recognized warning line of 70%.
During the same period, Great Wall Motor's debt-to-asset ratio was 65.64%, SAIC's debt-to-asset ratio was 63.95%, BYD's debt-to-asset ratio was 47.15%, and GAC's debt-to-asset ratio was 40.80%.
The Zeekr brand will achieve a revenue of 51.636 billion yuan in 2023, a year-on-year increase of 62%, but a loss of 1.135 billion yuan, fortunately, the loss has narrowed compared with the previous year, and the Lynk & Co brand will achieve a profit of 34.787 billion yuan in 2023, a year-on-year increase of 19.5%, but a loss of 1.105 billion yuan, compared with the previous year.
This also explains why Geely chose to reduce its holdings and cash out when Volvo Cars' share price was not very good in November last year. Geely was likely to be in dire need of cash to ease its financial pressures, especially at a time when best-selling models were still losing money, and the price war in China's auto market was already intensifying.
From the end of last year to now, Geely has launched no less car purchase discount activities, such as the 2024 Spring Car Purchase Festival promotion, which provides consumers with a limited-time discount of 2 billion yuan, during the event, the minimum starting price of Geely models is only 29,900 yuan, and the cash discount can reach 47,000 yuan.
During this month's Beijing Auto Show, the Geely Galaxy hybrid series announced a time-limited discount of up to 25,000 yuan, which is the second official drop of the Geely Galaxy series this year, and it has only been more than 50 days since the last price cut, and Geely's anxiety can also be seen.
At present, Geely is improving its cash flow in the long term by optimizing its product mix, reducing costs and increasing efficiency, and expanding its economies of scale.
In 2023, Geely's full-year operating profit margin will be 2.2%, a year-on-year increase of 0.4 percentage points, and the annual net cash flow from operating activities will be 22.342 billion yuan, a year-on-year increase of 39.5%.
However, 2024 is a big year for Geely's products, and costs such as R&D expenses and sales expenses may increase, and the external competitive environment is also more confusing because of the entry of Xiaomi SU7. So it's no surprise that Geely planned to sell its Volvo Group stake to replenish ammunition before the war.
02 Go to sea
Geely wants to continue to increase gross profit margin and improve brand profitability, and overseas markets will undoubtedly be the focus of its continued efforts.
In fact, Geely's international layout started very early, and the results achieved are also good. By the end of 2023, Geely had 533 sales and service outlets in 70 countries around the world, continuing to break through the business layout of Europe, Africa, Latin America, the Middle East, and Asia-Pacific.
In the Mexican market, Geely has established a fourth subsidiary to develop the Latin American market with systematic strength, in Malaysia, Geely has significantly increased the market share of Proton vehicles through technology, supply chain empowerment and industrial synergy, and Lynk & Co has already expanded into new markets such as Israel, Saudi Arabia, Oman, Qatar and Vietnam, and will release new pure electric models in Europe in the future.
In 2023, the continent will export about 4.91 million vehicles, becoming the world's largest automobile exporter, which means that the broader overseas market is opening its arms to many domestic cars.
Geely exported a total of 274,000 vehicles in 2023, a year-on-year increase of more than 38%, and the export volume reached a new high, with overseas sales accounting for 16% of the group's total share. Although Geely's export performance is good, there is still a lot of room to catch up compared with Chery and SAIC.
Geely's advantage in expanding overseas markets lies in the fact that it can adopt a resource-integrated overseas strategy through the acquisition of shares in Volvo, Proton Motors of Malaysia, Daimler Group, and Renault Korea Motors, as well as the joint establishment of the high-end brand Polestar Cars with Volvo and the establishment of a joint venture with Daimler.
Geely can be based on its own multi-brand matrix to break through each market individually. For example, the Lynk & Co brand mainly exports hybrid and plug-in hybrid models to Europe, the Proton brand is based in Malaysia and radiates the entire Southeast Asian market, Lotus is positioning itself as a pure electric supercar to go global, and the Geely brand is mainly entering the Russian and Middle East markets.
In the process of acquiring Volvo and integrating with it, Geely Automobile has become the company with the most overseas vision among Chinese car companies and the most similar to Western car companies. Geely is still the only automotive group in Asia to be selected in the International Automotive Standards Cooperation (IATF).
And Volvo's factories in Europe, the United States and other places also have a special role for Geely. In order to protect the market position of local car companies, Europe has opened a countervailing investigation against Chinese new energy vehicle companies, and the establishment of local production bases in Europe and the realization of localized supply have become an important way for Chinese car companies to go overseas in Europe.
However, today's Geely is no longer the "small" enterprise that needed Volvo to export technology and drive brand awareness more than ten years ago. In the era of electrification transformation, Volvo needs to take Geely's technology back and launch new cars based on Geely's vast SEA architecture to seize the opportunity in the European and American electric car markets.
Although the electrification transition is active and thorough, Volvo's new energy vehicle sales continue to be sluggish. In 2023, Volvo Cars' global retail sales will reach 708,700 units, of which only 113,400 are pure electric vehicles, so there are no shortage of worries that Volvo will become a second-rate car company in the new era.
Geely, on the other hand, will continue to explore overseas markets, and in this process, Volvo is not Geely's only choice, and may not even be the most preferred choice.
03 领先
Three years ago, Geely unveiled the "Smart Geely 2025 Strategy", which is a new starting point for the group to achieve its goals of globalization, electrification, intelligence and technology.
One of the strategies is to achieve a total sales of 3.65 million units by 2025, which is indeed a big challenge for Geely Automobile, which has not yet exceeded 2 million units in annual sales. Another goal is to reach 30% of new energy vehicles, which Geely Automobile has achieved so far.
However, the most important strategic goal is as Geely Automobile CEO Gan Jiayue said, "Geely wants to maintain the leading position in core technology, we have to think about what kind of car the car will be in the future, and the core of what we want to do in the future is to explain the real logic behind it." ”
Geely Automobile CEO Gan Jiayue
Geely's brands are actively responding to customer needs in various market segments, with Geely Geometry, Geely China Star and Geely Galaxy series targeting the mass market with a price range of 100,000-200,000 yuan, while Lynk & Co focusing on the price range of 200,000-300,000 yuan and positioning in the mid-to-high-end market, which is an important part of Geely's electrification, high-end and globalization.
ZEEKR is positioned as a luxury intelligent pure electric brand of more than 300,000 yuan, ZEEKR 001 has won the "sales star of more than 300,000 Chinese brand pure electric models" for consecutive years, and ZEEKR 009 has entered the first echelon of the whole category of luxury MPV of more than 500,000 yuan.
The root cause of the improvement of product strength comes from Geely's all-round improvement in technology, sales, marketing, marketing and other elements through endogenous cultivation + epitaxial mergers and acquisitions.
Product power and cost performance are not the same concept, and Geely has been calling for a return to value in this round of price wars, because Geely believes that the capital market's evaluation of car companies will eventually return to profitability. At the moment, this state of being forced into a price war, and even having to sell off a large number of Volvo shares to replenish cash, is not what Geely wants.
In fact, no car company really likes to fight a price war, and we want to seize the opportunity of overtaking in the corner brought by the technical advantages in the field of electric intelligence to the mainland automobile industry, and alleviate the contradiction of intensified competition in the mainland automobile industry by expanding the overseas business, and promote the brand of the automotive industry.
Geely's next strategic plan is to "seek progress in stability", "stability" is to do a good job in the production and sales of traditional fuel vehicles, and "progress" is to seek breakthroughs in the field of new energy (electric, hybrid, green methanol, etc.), and even low-orbit satellite Internet new technology and new product application development, and come to the forefront.
Geely Automobile's share price performance (since January 2019)
To this end, Geely has prepared a capital expenditure budget of 15 billion yuan this year, which will be mainly used for the research and development of new models and intelligent technologies, as well as the upgrading of existing factory production facilities.
It is foreseeable that the funds obtained from the sale of Volvo Group shares will eventually flow to Geely's optimistic sub-brands.