Geely: Cross-border M&A Helps Transformation

[Research Bank of 100 Enterprises in 100 Cities and 100 Counties]

A motorcade with Zhejiang B license plate passed in front of the Kremlin. These cars are Geely’s new SUV Bo Yue, which was officially listed in Moscow, Russia in February this year. This motorcade started from Xi ‘an, across Eurasia, and ended in London, England. Passing through 58 cities in 9 countries, "Geely" brings local people a brand-new understanding of China cars.

Founded in 1986, Geely Group started its business by producing refrigerator parts and motorcycles. In 1997, it officially entered the automobile industry. As the first private automobile manufacturing enterprise in China, its road to manufacturing cars can be described as from scratch, from small to large, from weak to strong, and achieved leap-forward development. In 2017, the total sales volume of Geely Automobile was 1.247 million, and its operating income reached 92.8 billion yuan.

Accelerate technological innovation internally and realize transformation and upgrading; Accelerate the integration of resources and realize the global layout. Geely Group has embarked on a road of transformation of private enterprises with distinctive characteristics and remarkable achievements, which has set a benchmark for the promotion of China’s own brand car enterprises.

From overtaking in a corner to catching up in a lane change.

In May, 2007, Geely announced that Geely Automobile has entered a strategic transition period, and it is the safest, most environmentally friendly and most energy-saving car, which is made by Geely. Geely, which has always gained competitive advantage by low-price strategy, began to change its development strategy from "low-price strategy" to "advanced technology, reliable quality, satisfactory service and overall leadership". This transformation indicates that Geely will no longer rely on price competition, but move from price advantage to technology leadership.

How to fight this technical war well? While enhancing its independent innovation capability through continuous R&D investment, Geely relies on cross-border mergers and acquisitions to acquire the core technologies of international leading enterprises and integrate global resources to strengthen its innovation capability.

In 2009, Geely acquired the second largest automatic transmission manufacturer in the world, DSI Australia. DSI has an annual production capacity of 180,000 automatic transmissions, and it is an important supplier to American Ford, South Korea’s Ssangyong and India’s Ma Xinjue. Through the acquisition, Geely introduced DSI’s advanced automatic transmission products and technology into China automobile industry, which greatly strengthened Geely’s own R&D and production capacity of automatic transmission.

In 2010, Geely spent $1.8 billion to acquire a 100% stake in Volvo. Through mergers and acquisitions, Geely has acquired the global ownership and use right of Volvo Car trademark, and its sales and service system is distributed in 2325 outlets in more than 100 countries, covering 10963 patents, special intellectual property rights and other valuable assets, including engine, vehicle platform, mold safety technology and electric technology, which has laid a solid foundation for Geely to overcome technical bottlenecks and improve its innovation ability.

From overtaking in corners to catching up in changing lanes, Geely has continuously acquired Volvo, Proton, Lotus and London electric vehicles through capital operation in less than 8 years. Cross-border M&A is embedded in the forefront of international technology, and as a lever, it is integrated into the global innovation network to incite innovative resources, and constantly learn, digest and absorb the advanced technology of the leaders, thus realizing the catch-up and transcendence of technology.

From technology learning to technology output

Under the guidance of global innovation strategy, Geely has realized the transformation from technology learning to technology export, and promoted China national automobile brands to go abroad. As important countries along the "Belt and Road", Russia, Belarus, Ukraine and other countries are the bridgehead for Geely to go to Europe. The "Baioji" factory is the first automobile joint venture project between China and Burroughs, and the only passenger car manufacturer in operation in Burroughs at present, with a planned production capacity of 60,000 vehicles per year.

"Overseas development is not just about selling more cars." An Conghui, president of Geely Holding Group, believes that Geely responds to the "Belt and Road Initiative" and the idea of "going global" is to realize the global layout of products, technologies, talents, standards and capital. "To transform into a global company, Geely’s path is to integrate into the global value chain, integrate global resources, and build the core competitiveness of enterprises."

Russia to the north, Malaysia to the south, and Geely’s vehicle technology to the south and north. In May 2017, Geely acquired Proton Automobile, Malaysia’s "national treasure" automobile brand, and Malaysia became an industrial cooperation base for Geely to enter the Southeast Asian market. Relying on Proton’s existing production capacity and supplier system, Geely opened the door to Southeast Asia and gained huge market space.

In the future, Geely’s overseas factories will introduce more car models. Geely’s dream is coming true-let China cars run around the world. By 2017, Geely Automobile has established a number of factories in Egypt, Sudan, Iran, Sri Lanka, Ethiopia and other countries, and the whole vehicle has been exported to more than 20 countries and regions.

From Independent Innovation to Collaborative Innovation

Experts from the Regional Coordinated Development Research Center of Zhejiang University believe that every step of Geely in recent years is towards the goal of global car companies, in which the integration of multi-brand resources is an essential element. Geely’s overseas expansion is through independent innovation and collaborative innovation between multinational companies in the same industry, thus achieving a breakthrough in vehicle technology research and development.

From latecomers to leaders, Geely’s global layout not only gains a broader market, but also draws on global wisdom and resources to establish a strong R&D system-four R&D centers in Hangzhou, Ningbo, Gothenburg and Coventry, and four design centers in Shanghai, Gothenburg, Barcelona and California. "Join hands with partners to occupy the commanding heights of technology through collaboration and sharing." At the beginning of this year, Geely invested in Daimler, and Li Shufu, chairman of Geely Group, was also thinking about this strategy.

Collaborative innovation has achieved fruitful results in the cooperation between Geely and Volvo. As a "dark horse", the joint venture brand of Geely and Volvo has entered the European market. The research and development and design in Europe and the global manufacturing of the brand are the crystallization of "Jiwo Love" for seven years. As the first production base of Lectra, Geely Taizhou Factory is expected to sell 500,000 Lectra vehicles by 2020.

At present, Geely’s total assets exceed 200 billion yuan, and it has 12 overseas factories. It owns automobile brands such as Volvo Car, Geely Automobile, Link Automobile, London Electric Vehicle and Remote New Energy Commercial Vehicle. In terms of scale, Geely has entered the world’s top 500 companies, but there is still a long way to go to become a respected global enterprise: "We strive to not only produce high-quality cars, but also make every supplier feel happy to deal with Geely, so that they can form a community of destiny with Geely and form a very competitive supply chain relationship."