Geely at the Centre of Recent Stock Acquisitions

Last week I wrote an article about Lynk & Co, a subsidiary of Geely who have become a companion brand to Volvo, also owned by Geely. In that article I wrote that Volvo had bought a stake in Lynk & Co.

Recently, Geely bought 10% of Daimler for $9B and there have been reports that Daimler would buy a stake in Volvo. This is an example of the convoluted ownership structures that get created when companies start buying stakes in each other. Geely have been on the acquisition trail for a while – they were apparently interested in buying FIAT Chrysler when the Italian American company was looking at partnerships and other ways to share development costs of new vehicles. Creating new products is an expensive business these days!

What is interesting is that Daimler have already got a tie up with BAIC Motor, a direct competitor to Geely, through their joint venture – Beijing Benz.

Geely is also the new owner of Terrafugia, the creators of a flying car and so we could see a wide range of technology sharing through the group. In a recent article I wrote that Airbus and members of the VW Group were working together and so this tie up is highly competitive!

In my review of recent articles, I suggested that there might be a problem with the Lynk & Co name in the US as it sounds too similar to Lincoln. Well, Ford is already preparing to fight for their brand. Ford are challenging the trademark application by the Chinese group.

There has been an ongoing discussion for several years – mostly since the Global Financial Crisis when General Motors and DaimlerChrysler were in difficulties – that the automotive industry would shrink to three or four major groups. In the last four decades, the US market has effectively shrunk to 3 groups: Ford, General Motors and Chrysler (who had absorbed the American Motors Corp).

At the same time, Europe was shrinking with manufacturers and component makers combining into:
Britain: BLMC and declining niche makers – with BLMC fracturing into many other groups including Tata owned Jaguar Land Rover.
France: Renault and the PSA Group.
Italy: FIAT Group.
Germany: VW Group, BMW and the Daimler Group.
Ford are a constant with the European arms of General Motors and Chrysler both now inside PSA.

In Japan, there has been very little rationalisation, the last was probably Toyota absorbing Daihatsu. So today we have 15 – 20 large groups with many niche, low volume independents, typically at the high end of the price range. However, China was always too small and their industry was started by existing international manufacturers. Now though, they have grown thanks to a strong local market and have businesses that have the clout to expand outwards.

This means that if the industry is to shrink again to single digit groups (I don’t think it will be as low as four), we can expect one of them to be based in China. Geely are manoeuvring to be in the right place and the right time!