Deal Brings New Opportunities, Greater Challenges For Chinese Automaker
Ford’s closely-watched deal to sell the beleaguered Swedish auto brand Volvo has finally gone through, following months of final negotiations and management shakeups, the Associated Press reports today. Jing Daily has kept a close eye on this story since speculation first surfaced last year, noting that the $1.5 billion purchase of Volvo by Geely, a Chinese automaker known more at home for inexpensive, entry level models like its QQ rather than world-class luxury vehicles, presents the company with major global challenges in addition to opportunities.
From the AP:
Industry analysts say 13-year-old Geely, barely known abroad, will face a struggle in integrating the two corporate cultures and turning around Volvo Cars, a perennial money-loser in a country with strong labor unions.
“Why would a company suddenly make money by simplying replacing a boss?” [Zhang Xin, an industry analyst for Guotai Junan Securities in Beijing] said, “I don’t hold high expectations for Geely. They still have a long way to go.”
Li said that under Chinese ownership, Volvo will strengthen its presence in the U.S. and European markets and expand in China and other emerging markets.
Along with other challenges that we’ve previously covered, such as assuaging concerns about quality standardsabroad, and the fact that few overseas know much about Geely or Li Shufu, Geely is presented with some interesting opportunities.
One is the potential to solidify its position among Chinese automakers through huge expansion of the Volvo name and presence in China, possibly cutting deals with the Chinese government to replace the ubiquitous black Audis seen driven by government officials throughout the country with China-made Volvos. While selling made-in-China Volvos may be more difficult than many imagine, depending on the consumer in question (previously on Jing Daily), Li Shufu will certainly have an easier time trying to sell fleets of Volvos to the government than ever before.
The second opportunity for Geely following the sealing of this Volvo deal is expansion for not only Volvo but also the Geely brand itself in emerging markets around the world. Though Chinese auto brands already have something of a foothold in some developing markets in South America, Africa and South Asia, combined Volvo/Geely dealerships in these markets can both lend credibility to the Geely name and possibly get the Volvo name into markets the company never saw fit to try to crack under Ford ownership.