Li Shufu seems to have a special love for the word tiger goes down the mountain.
Li Shufus mood may be different with the same word.
Ten years ago, the automobile industry was recovering from a low point. Geelys merger and acquisition of Volvo was regarded as a snake swallowing adventure at that time. Today, ten years later, the automobile industry is even more turbulent. The market low point and the industry transformation go hand in hand, and the group heating of automobile enterprises is no longer news. Whether VW is in alliance with Ford, Daimler and BMW have reached in-depth cooperation, it has confirmed the anxiety and determination of automobile enterprises for the great changes in the industry.
Geely is also getting closer to Volvo.
On February 10, 2020, Geely Automobile and Volvo car announced to plan in-depth business restructuring, with a view to becoming a strong global automobile group and leading the industry reform.
But different from the M & a ten years ago, after the announcement of this news, both private and domestic capital believe that this will bring a win-win situation of 1 + 1 > 2, and market investors and institutions have expressed their enthusiasm for Geely.
The day after the announcement, Geely drove higher, up more than 11% from the previous trading day. After the announcement of the news, Credit Suisse raised its investment rating on Geely Automobile, which was significantly raised from the previous neutral to outperform the market; securities companies such as Nomura and Western securities gave buy ratings; CICC predicted that after the restructuring, the stock price has a 43% upward space from the current price.
Now its time to face the future. We hope to further cooperate in a closer way and take advantage of the power of the capital market, especially in the Asia Pacific capital market where Geely has a greater influence and the European and American capital market where Volvo has a greater influence. On April 21, Yuan Xiaolin, global senior vice president of Volvo car group and President and CEO of Volvo car Asia Pacific region, said in an exclusive interview with Chinese entrepreneurs.
Source: video screenshot
Standing at the node of ten years, looking back on this sample case of overseas acquisition of Chinese private enterprises, people are most concerned about these questions: how is digestion after Geely snake swallow elephant acquires Volvo? Why should Volvo adopt the strategy of letting the tiger go back to the mountain? What did Volvo get after the merger? How to face the next decade? What game is Li Shufu playing? Chinese entrepreneur tries to find the answers to these questions by interviewing Volvo executives in China and Geely related people.
How to digest after snake swallows elephant
This is just one of the achievements of Geely in terms of products after its acquisition of Volvo.
According to public data, in 2009, Volvos global sales volume was about 335000 vehicles, and in 2019, the global sales volume reached 705000 vehicles. Since its establishment 93 years ago, the annual sales volume exceeded the 700000 vehicle mark for the first time. In terms of profit, in the first year of Geelys acquisition of Volvo, Volvo turned from loss to profit. By 2019, Volvo realized an operating profit of SEK 14.3 billion (about 10.4 billion yuan).
As an acquirer, Geelys performance in the past decade has also been on the rise - in 2010, Geelys revenue exceeded 20 billion yuan, with a net profit of 1.37 billion yuan. In 2019, Geely Automobile realized a revenue of 97.401 billion yuan and a net profit of 8.26 billion yuan.
Li Donghui, executive vice president and chief financial officer of Geely Holding Group, said in an in-depth dialogue with Wu Yingqiu, chairman and CEO of Huanqiu automobile group, senior auto industry commentator, shuipi, editor in chief of Huaxia times and famous financial commentator, this merger and acquisition is successful no matter from the perspective of Wal mart or Geely Automobile.
Li Donghui divides the collaborative development in the past decade into three stages, namely, financial coordination, technical coordination and strategic coordination.
According to Li Donghui, a milestone of financial coordination between the two sides is that with the support of Geely Holding Group, Volvo car obtained the loan support from China Development Bank.
According to public information, in December 2012, Volvo announced that it would borrow 922 million euros (about US $1.2 billion) from China Development Bank, and the funds raised would be used to refinance existing loans and ensure the smooth progress of the growth plan. The loan will expire in 2020. In November 2013, Volvo said it would obtain US $800 million loan from China Development Bank to develop new products and strengthen the capital structure of the enterprise. The maturity of the fund is 2021.
Li Donghui said in the dialogue that whether from the financing line or the financing period, it plays a very key role in Volvo car product R & D and layout investment. Through this collaboration, Volvo and Geely have realized the significance of collaboration.
On February 20, 2013, Geely set up a new European R & D center in Gothenburg, which is an important event in technical coordination between Geely and Volvo.
Photography: Shi Xiaobing
The research and development of CMA platform, a small vehicle platform, has become an opportunity for technical cooperation between the two sides. At that time, Volvo needed partners to develop jointly. The key lies in: first, there should be funds, and second, there should be enough amount to amortize to product development. The technical synergy with Geely makes sense.
In the above dialogue, Li Donghui referred to the landmark event of strategic coordination between Geely and Volvo, which was the joint venture of Geely and Volvo to establish linker in 2017. At the end of 2017, the first model of Lingke was launched. In 2018, the sales volume of Lingke brand was 120000, and in 2019, the sales volume was 128000. For Li Shufu, linker may be the best crystallization of Geely and Volvo in a decade. In April of this years live broadcast, he did not grudge praise for the latest model of linker brand, linker 05.
In an interview with the media this year, an Conghui, President of Geely Holding Group, also mentioned that the biggest beneficiary of Geelys cooperation with Volvo is linker. Link is the crystallization of technical cooperation between Geely and Volvo, and also the carrier of cooperation between the two sides.
First, in terms of Volvos management, Geely didnt control and suppress it in a stingy way, but gave it to a relatively professional team to manage it. This is a very right direction, and its also a very atmospheric place for Li Shufu..
Second, Geely pays great attention to the protection of Volvo. Although Volvo and Geely have a lot of things to share, they are technical aspects that consumers cannot see.
Third, Geely has effectively used some of Volvos resources. Volvo has a strong feedback effect on Geely in terms of brand, technology, quality and R & D, but it has not hurt Volvo. For example, Geely recruited Volvos retiring engineers to Geely to help Geely sort out the R & D process, which is priceless for Geely. Volvo can also bring young people up.
Why to release the tiger to the mountain after acquisition
But on the other side of the sales increase, Volvo is also facing more fierce market competition and product prices that are more concerned than ever before. In the second year after being acquired by Geely, Volvo put forward an ambitious five-year development strategy in China. By 2015, Volvo plans to sell 200000 cars in China, accounting for 20% of the market share of Chinas luxury car market. In 2010, Volvos sales volume in China was only about 30000, and its share in the luxury car market in China was about 4.4%. At present, Volvos goal in China has not been achieved.
In the past two or three years, there has been a lot of controversy about the price of Volvo products. In September 2019, 2020 Volvo XC90 was officially launched, with the official price range of 633900-833900 yuan. However, within half a month after the launch of a new car, there will be a market discount of 130000 yuan. After that, the new Volvo S60 will have a maximum discount of 70000 yuan in only one week.
The price can only be determined by the market, not by the seller or the buyer. No matter where the brand competes, the automobile terminal may face changes. When we look at the dimension of 10 years or more, we will find an obvious trend: automobile consumption will become more and more reasonable. Yuan Xiaolin believes that this is also the process of Chinas automobile market becoming more and more mature.
Yuan Xiaolin, global senior vice president of Volvo car group, President and CEO of Volvo car Asia Pacific region. Source: Respondents
In the process of industry transformation, Volvo also tries and explores the direction of brand evolution. In the view of industry personages, Volvo has to some extent got rid of the stereotyped Nordic brand image with only safety highlights and become more modern and technological. For example, Volvos cooperation with Uber in autonomous driving is seen as a case in point.
Yuan also sees innovation as one of Volvos highlights over the past decade.
Volvo is the first company to work with Google to build a standardized Android system for cars, he said. In 2015, Volvo and Google cooperated to develop the next generation of Volvo intelligent internet interaction system based on the car Android system. The unique advantage of this system is that it is an open and standardized platform that can integrate intelligent applications comparable to mobile phones. Because this architecture provides a basic structure based on the Android system of the automobile version, which can carry all local market demands such as Sinochem. Whether its bat or Huaweis products or applications, they can be installed on this system. .
In 2017, Volvo put forward a comprehensive electrification strategy. The global impact of such a claim has made us one of Fortune magazines 50 companies that changed the world in 2017. Yuan Xiaolin said.
But on the other hand, transformation means not only risk, but also more resource investment and capital cost. Volvos profitability is weakening. According to public data, Volvos profit margin in 2017 was 6.7% , 2018 5.6% In 2019, it will be further reduced to 5.2% u3002 How to provide sufficient resource support for forward-looking work in the period of industry transformation may be the next test faced by Volvo.
How Volvo faces the next decade
The idea finally came true.
At the beginning of May, Li Shufu appeared in the boss to bring the goods. He made a voice for the polar brand and test drove the polar 2. Its really not easy to build this car. The requirements for its various performance indicators are very high. Today, it has finally become a reality. Li Shufu said with emotion.
In 2017, Polaris officially became an independent high-performance luxury electric brand of Volvo. To some extent, Polaris is a breakthrough point for Volvo and Geely to continuously lead innovation in electrification.
Shen Feng is the global CTO and the first president of Jixing in China. Before taking up the position of Jixing, he was president of R & D in Volvo China. At that time, the name of the brand was polestar. It was a very ambitious decision not to use Volvos name. Shen Feng told Chinese entrepreneurs.
The mission of Jixing is to increase Volvos image in electric and intelligent aspects. When the brand appeared, someone asked if Jixing was equivalent to AMG of Mercedes Benz? Shen Feng replied, not quite. Is it like BMWs I series? Shen Feng replied, not exactly. His final answer is, if you combine the AMG of Mercedes Benz with the I series of BMW, it will be closer.
In an interview with the media, Li Shufu defined the brand of Jixing as a new car making force, and he decided that no volvo logo would appear in Jixings car, hoping that Jixing would be different from Volvo. Shen Feng cant see Volvos words on his business card. I was a little uncomfortable. (at that time) there were not many people who knew about Polaris. When they handed their business cards to others, the first feeling of others might be, is this a PPT company? Memories of Shen Feng. What he understands is that Li Shufu hopes that Jixing can break into a world as soon as possible.
The production base of Jixing is in China. Volvo will give full support to Jixing in many aspects, such as technology. Geely will provide support in operation, finance, communication with Chengdu local government and plant location construction.
In April 2018, polaristars first mass production model, polestar1, was officially launched, with a price of 1.45 million yuan, but only a few sales. In April 2019, Polaris released the second product and its first pure electric vehicle - Polaris 2. On May 9 this year, Polaris 2 officially opened its reservation. But in the generally difficult market of new forces in car building, it is still unknown whether Polaris can rise against the trend under the support of Volvo and Geely.
As for Volvo brand, another unknown in the next decade is whether it can speed up the pace of globalization.
In terms of sales volume in major global markets in the past five years, Volvos growth in the U.S. and European markets is not fast enough. In an interview with the media, Li Shufu said that after the efforts of the past decade, China has become the core engine of Volvos development. According to the public data, Volvos sales in China accounted for 8% of global sales in 2010 and nearly 22% in 2019. In April 2020, the proportion is as high as 46%.
But on the other hand, Volvos authorization for the Chinese market still has a lot of room to improve. From 2016 to now, the frequent adjustment of Volvos sales team in China is attributed to the insufficient decentralization of headquarters to the local market of China. Geely will give options or stocks above the middle level to motivate employees when the performance is good, but Volvo does not. Although Volvo China is profitable, it may be because the global or other regions are not doing well, so the bonus of the Chinese team is limited, which is ridiculous. A former Volvo employee told Chinese entrepreneurs.
In June 2019, qinpeiji took over as the president of Volvo cars Greater China sales company. Qinpeiji joined Volvo in 2011 and was previously vice president of sales and dealer networks.
A Volvo dealers evaluation of qinpeiji for many years is that he is familiar with the system, more grounded, and more considerate of the interests of manufacturers and dealers. He also attaches equal importance to sales and after-sales, so as to make up for the decline of sales profitability.
Under the background of general decline of automobile industry in 2020, how to deal with the relationship between Chinas local market and global market will affect the development space of the next decade to some extent.
What game is Li Shufu playing
One of Lis answers is the merger and reorganization of Geely and Volvo. According to people who know Volvo, this is Li Shufus unique skill, which can solve many problems at one stroke.
One immediate benefit is that resource integration will help Geely and Volvo reduce their costs and improve their overall profitability. Yuan Xiaolin told Chinese entrepreneurs that the most direct manifestation of the restructuring effect is the purchasing synergy effect. Of course, this is not to say that Volvo and Geely are going to buy the same thing, but that Volvo is going to buy one thing, Geely is also going to buy one thing. When the two are combined, the overall purchase volume will change, and the bargaining space for buyers will certainly be large..
According to the above industry analysts, for Geely, the reorganization and listing of Volvo, by increasing the liquidity of Volvo shares in the secondary market, can also bring more capital reserves for the company to survive the industry downturn. The novel coronavirus pneumonia has seriously affected the supply chain and production level of the group, and the current adverse factors will continue in the short term. In 2020, Geely has become the most difficult year for the group in the past 2019 years, Geely said in a report.
For Volvo, opening the financing channels of the capital market will also help it get more development space.
In fact, according to public reports, Volvo car suspended its IPO plan in 2018. In an interview with foreign media, Hanken Samuelson, President and CEO of Volvo car group, said, the current market environment can not ensure that Volvo will perform well after listing, and the company needs to be listed in a stable market environment.
As for Volvos IPO suspension, it is believed that investors valuation of Volvo is lower than Geelys internal expectation.
For the merger and reorganization, Geely official announcement said that the new business group after the reorganization will realize the docking with the global capital market through the listing body of Hong Kong Geely Automobile, but not excluding that the next step will also consider listing in Stockholm.
According to the above industry analysts, Geelys ten-year acquisition of Volvo, no matter in management wisdom or capital operation, can be regarded as a model for Chinese enterprises to go global. But if Volvo can complete the capitalization before the industry enters the downward channel, then Li Shufu is equivalent to stepping on the peak and trough of the industry in the past ten years. In the past decade, Geelys capital diversification and internationalization have been very successful. But in terms of timing, it would be better if we prepared for the move a year earlier. In March this year, Li Shufu told outlook that after ten years of market cooperation, Geely and Volvo car have accumulated some experience in purchasing, R & D and sales. Next, we should consider how we can find our own space in the process of globalization and anti globalization. We should not only conform to the laws and policies of different countries and Strategies of different countries, but also find our own living space for development. We need to practice and explore constantly and adjust step by step. Source: responsible editor of China Entrepreneur Magazine: Yang bin_nf4368
According to the above industry analysts, Geelys ten-year acquisition of Volvo, no matter in management wisdom or capital operation, can be regarded as a model for Chinese enterprises to go global. But if Volvo can complete the capitalization before the industry enters the downward channel, then Li Shufu is equivalent to stepping on the peak and trough of the industry in the past ten years. In the past decade, Geelys capital diversification and internationalization have been very successful. But in terms of timing, it would be better if we could prepare for it a year earlier.