Geely Holding Group just announced that the two parties will merge on the basis of maintaining the existing independent company structure.
Volvo Cars Co., Ltd. and Geely Automobile Holdings Co., Ltd. (HK.0175) jointly announced that the two parties have reached the best merger plan. While maintaining their existing independent company structures and achieving their strategic goals, continue to expand cooperation areas, deepen cooperation in the new four modernizations (electrification, intelligence, connectivity, and sharing) of the automobile, exert synergy effects, and truly achieve business integration The greatest value of the company, strengthen technological advantages, and continue to lead industry changes.
According to the consensus content of the cooperation, Geely Automobile and Volvo Cars will focus on the forward-looking technologies of the new four modernizations of automobiles, merge and collaborate in business areas such as powertrain, three-electric technology, and highly automated driving to continue to promote technological innovation. The two parties merged the powertrain business in the form of equity merger to establish a new company, focusing on the development of a new generation of dual-motor hybrid power systems and high-efficiency internal combustion engines. In addition to continuing to supply both parties, it also provides products and services to third-party automotive companies. The company plans to start operations before the end of the year.
The merger plan between Geely Automobile and Volvo came to an end for the time being. The whole plan went from the early powertrain merger to the discussion of the overall merger, and then temporarily suspended due to Geely Automobile’s landing on the Sci-tech Innovation Board, and finally returned to the original point. That is, the powertrain business of the two parties merged, and then joint research and development on the next generation of electric vehicle technology and other fields. Although this decision will not allow Geely and Volvo to establish a global group of car companies, it also leaves a window for Volvo to go public again and have the opportunity to use the opportunity of capital to flow into new energy vehicles to obtain greater benefits. Six points of cooperation were mentioned in the press release issued by Geely Holding Group, namely: the two parties merged the powertrain business to establish a new company, focusing on the development of a new generation of dual-motor hybrid power systems and high-efficiency internal combustion engines; A generation of pure electric exclusive modular architecture; the two parties will jointly develop the world’s leading highly automated driving solutions based on their own rich research and development results and experience; the two parties will expand the scope and scale of joint procurement and reduce costs; Lynk & Co will make full use of Volvo Car’s overseas channels and after-sales network gradually serve global users; both parties maintain the existing independent company structure. It can be seen from the above points that this “merger” is not a traditional integration of the company and the assets between the companies, but mainly because the two parties merged the powertrain business into a new company. In addition, the two parties strengthened collaboration to develop new The powertrain and next-generation electric architecture of the two companies further maintain the deep synergy between the two parties, but in fact the two companies still maintain the existing independent company structure. In fact, this view was confirmed in the press release issued by Volvo Global. The title used by Volvo is “Volvo Cars and Geely Auto to Deepen Collaboration”, which means that both parties will deepen collaboration. Volvo’s statement is that the two parties have reached an agreement to expand cooperation and will maximize the advantages of Sweden and China’s automobile groups to achieve synergy in powertrain, electric vehicle architecture sharing, joint procurement, autonomous driving technology and after-sales. Both parties have made it clear that in deepening cooperation again, or “merger”, first, the existing powertrain business will be merged into a new independent company by means of equity merger. “The focus is on the development of a new generation of dual-motor hybrid power systems and high-efficiency internal combustion engines. In addition to continuing to supply both parties, it also provides products and services to third-party automobile companies. The company plans to start operations before the end of the year,” Geely explained. In fact, Geely Automobile has disclosed its plan to develop a DHT hybrid power system and the progress of its high thermal efficiency engine in the previous prospectus on the Science and Technology Innovation Board. At present, the domestic auto companies Great Wall Motors and BYD Auto have taken the lead in releasing their DHT hybrid systems, and later, including Chery, FAW and other auto companies are also actively developing. Therefore, the merger of the powertrain business this time also specifically mentioned that Geely and Volvo are focusing on dual-motor hybrid systems, which will inevitably further accelerate the advancement of Geely in DHT technology, and will start planning for Volvo and Lynk&Co’s new products. To a positive effect. Especially for the Lynk & Co brand, with the merger of the powertrain business, Lynk & Co, a company jointly held by Geely and Volvo, will get rid of the problem of the largest powertrain ownership and become a more independent research and development company. High-end brand. More interestingly, with the establishment of an independent powertrain company, the current powertrain and the new dual-motor hybrid power system can also be sold to other car companies. It is reported that a new car-making force has verified the 1.5T three-cylinder engine jointly developed by Geely and Volvo, but it has not completed the purchase due to various reasons. With the merger of the powertrain business, the export of powertrain may also become a new business increment. Another key point in the press release of both parties is the joint development and use of the next generation of pure electric exclusive modular architecture, and this research and development work has been launched. The two parties will also realize technology sharing in terms of three power and intelligent network connections, share battery packs and electric drive systems, and reduce costs through joint procurement. At the same time, as part of the joint research and development of the next-generation electric vehicle architecture, Geely and Volvo will also increase their investment in autonomous driving technology. This includes Zenseact, a self-driving software technology development company under Volvo Cars, to jointly develop the world’s leading highly automated driving solutions. Behind these statements means that this new platform will be used for Geely, Volvo, Lynk & Co and Polestar brand models, and its architecture bandwidth and modularity, scale and cost advantages will be further enhanced. At present, Geely and Volvo have in addition to the CMA architecture on the electric vehicle platform, each also has the SEA vast architecture and the SPA2 electric vehicle architecture, but some sources pointed out that the above two architectures are not fully authorized to share, and the only thing that can use these two at the same time The structured brand is the Lynk & Co brand, a joint venture between the two parties. However, Volvo mentioned in this press release that “the two companies are planning to share the new SEA and SPA2 electric architecture with their respective brands”, which means that both parties may have new opportunities in their future product portfolios. Why did Geely Automobile and Volvo choose to merge the powertrain business and jointly develop the next-generation electric vehicle architecture such a “deep cooperation” model, instead of a complete merger as previously estimated? As the leader in charge of the merger plan between the two parties, Volvo Global CEO Hanken Samuelson said: “After extensive evaluation and detailed study of various options, we reached a consensus that the current merger and cooperation plan is to strengthen cooperation and ensure continued growth. , And the best way to achieve maximum synergy in powertrain and other fields.” Volvo believes that after a detailed review of the combination plan, the two sides agreed to maintain the existing independent corporate structure while adopting changes. In-depth cooperation, gain new growth opportunities in their respective markets, and respond to the ever-changing industry challenges. “Deeper cooperation will enable Volvo Cars and Geely Auto’s existing stakeholders and potential new investors to focus on their independent strategies, performance, financial risks and returns. We will also have the opportunity to explore options in the capital market.” The automobile side also frankly stated that the current plan is the “best merger plan”. While maintaining their respective independent company structures and achieving their strategic goals, they will continue to expand the areas of cooperation in the new four modernizations (electrification, intelligence, network connection). To deepen cooperation in terms of integration and sharing), exert synergies, truly realize the maximum value of business integration, strengthen technological advantages, and continue to lead industry changes. As the actual controller of the two companies, Li Shufu, chairman of Geely Holding Group, expressed support for the merger plan and cooperation consensus. He emphasized that while Geely Holding maintained its independence, it also saw the tremendous benefits brought about by deeper partnerships and alliances. interest. “This will create two more powerful companies in the rapidly changing automotive technology and travel service fields.” Interpreting these words, it can be understood that the reason for the two parties not to choose a complete merger is to leave Volvo with the possibility of independent listing. Taking into account the current popularity of new energy automobile companies in the capital market, if Volvo can take advantage of the alliance’s technological first-mover advantage in the new energy field, it may be able to take advantage of the situation to obtain excess returns in the capital market. It is worth noting that due to the impact of the epidemic and the capital market’s high valuations for emerging fields such as new energy and autonomous driving, more and more auto companies around the world have begun to spin off their companies in order to achieve light-weight installations. Daimler plans to spin off Daimler’s commercial vehicles and list them separately. Volkswagen Group is also considering independent listing of Porsche to raise funds for electric vehicle research and development. There has also been news that General Motors does not rule out spinning off the electric vehicle business. On the other hand, the two parties are not discussing a complete merger plan, which is actually conducive to Geely’s speeding up its return to the science and technology board. A few months before this, Geely Automobile had already been on the Science and Technology Innovation Board, but it had not yet completed its registration and listing. Perhaps one of the obstacles is that Geely Auto may be merged with Volvo after it is listed. The overly complex structure may cause some unknown risks, especially if Geely Auto is a listed company in Shanghai and Hong Kong. Therefore, the choice of partial merger and in-depth cooperation will give Geely a simpler capital management structure, which is bound to help regulators approve its listing plan.