MB will become Volvo
Two decades ago, technicians at a little-known Chinese motorcycle company called Geely launched their quest to start building cars by stripping down their boss’s beloved Mercedes-Benz, piece by piece.
They were unable to put Li Shufu’s Mercedes back together again. But they did figure out how to make the company’s first automobile, the 1996 Geely No. 1, a Mercedes knockoff.
Studying Mercedes is once again central to Geely’s strategy. Mr. Li announced Feb. 24 that he had snared a 9.7% stake in Mercedes parent Daimler AG worth around $9 billion, making him the German auto maker’s biggest shareholder.
The move takes Hangzhou-based Zhejiang Geely Holding Group Co. one step closer to becoming China’s first global auto maker. China manufactures more cars than anywhere else, but no Chinese company has yet succeeded in making a car good enough to compete on the world stage. Geely, thanks to its growing international footprint and ability to absorb foreign technology, is poised to make that leap.
“Three years ago nobody would have thought it could be Geely,” said Hakan Samuelsson, chief executive of Sweden’s Volvo Cars, which Geely bought in 2010. “But today it’s a good guess.”
Mr. Li has been predicting his own success since at least 2001, when he declared in an interview with Chinese state-run television that “American auto makers like General Motors and Ford will definitely collapse” while Geely and other newcomers will rise.
For a long time, that looked like an empty promise. Geely sales were lukewarm in China until very recently, plateauing at 500,000 cars a year or less. The company’s first attempt to market itself abroad at the 2006 Detroit Auto Show led to humiliation, with Car and Driver magazine branding its cars as “hopelessly outdated.”
A Lynk 03 concept vehicle by Geely on display at the 2017 Shanghai auto show.
A Lynk 03 concept vehicle by Geely on display at the 2017 Shanghai auto show. PHOTO: QILAI SHEN/BLOOMBERG NEWS
Geely began laying the groundwork for future success with its 2010 acquisition of Volvo from Ford Motor Co. , which put it in a class of its own among Chinese auto makers by enabling it to tap directly into advanced auto technology, said Michael Dunne, a Hong Kong-based auto consultant.
Last year was a milestone. Sales of Geely Auto, the company’s main domestic line, nearly doubled to 1.25 million, making it the best-selling Chinese local brand. Its Hong Kong-listed shares tripled in value. With new acquisitions and brand launches, Geely’s portfolio now spans from trucks to supercars, with no parallel in China’s auto sector.
Its expanded roster includes Malaysia’s Proton, in which Geely took a 49.9% stake last year, British race-car legend Lotus, and the London EV Co., maker of the iconic black taxicab.
In 2017 Geely and Volvo also co-launched two new brands: Lynk & Co., and Polestar. Lynk went on sale in China last fall and targets young urban buyers with built-in mobile internet apps. Polestar is a premium electric-car company designed to take on Tesla Inc., and is set to hit the market in 2019. Geely has even invested in Terrafugia, a Woburn, Mass.-based startup developing flying cars.
Geely group sales volume, at nearly 2 million last year, still lags far behind industry giants Volkswagen AG , Toyota Motors Inc. and General Motors Inc., which sell about 10 million vehicles annually. It’s yet to be seen whether Mr. Li’s Daimler swoop will get him access to Mercedes know-how that could help Geely close the gap, and Mr. Li told German media Wednesday that gaining a seat on Daimler’s supervisory board wasn’t his priority.
What’s more, despite improvements in quality, Chinese cars are still regarded skeptically—even in China, where scores of local auto makers are kept alive by government support. Foreign marques manufactured in joint ventures still outsell domestic brands.
At Geely’s helm is the 54-year-old Mr. Li, the company’s controlling shareholder, ranked by the wealth-tracking Hurun Report as China’s 10th richest man, with a $17.4 billion fortune.
A Geely factory in Ningbo, China.
A Geely factory in Ningbo, China. PHOTO: REUTERS
A farmer’s son, he worked in high school as a photographer in his eastern China hometown before realizing he could make more money extracting silver from photo-development chemicals than he could selling pictures, according to his official biography. In the 1980s he founded a refrigerator company and later started Geely, which initially produced aluminum plates before shifting to motorbikes.
Private-sector auto makers weren’t allowed in China then, but Mr. Li clung to his dream of building cars even after the government ordered him to stop making his Geely No. 1, the Mercedes clone, on safety grounds. Mr. Li, who declined an interview request, later wrote of his lonely crusade in one of his many poems.
“There were but a few sincere, wise, brave children who walked barefoot on the ice in order to realize the dream of a Kingdom of Cars,” he mused.
After exploring ways to skirt the rules—including making cars at a prison factory through a company called Geely Boeing Auto that drew complaints from the U.S. aerospace giant—Mr. Li finally received clearance to produce cars in 2001, becoming the first private-sector auto maker in China.
Geely started making a name at home for its bargain-priced cars, but the calamitous trip to Detroit in 2006 showed Mr. Li that his company needed to focus on quality, as well as cost. He had a plan: Acquire to improve.
Mr. Li returned to the Detroit show the following year, undeterred, and walked up to executives at the Ford booth. “I’m Li Shufu from Geely, a Chinese car company: I’m interested in buying Volvo,” Mr. Li said, according to Geely Vice President Victor Yang.
The Ford people had no idea who he was. They told him politely that Volvo wasn’t for sale.
Starting next year, Volvo is set to produce only pure-electric or hybrid models. Geely itself wants 90% of its cars to be electric by 2020.
Great job. Have to applaud the chinese. They close their market where if you have to enter you have to partner with a chinese firm. 30 years later, they took the technology and now they buying western firms. Our fault for having free entry but accept less than that just to enter their market. I think we been outplayed these 30 years.
Anyone else seeing parallels to the Japanese buying frenzy of the late 80s though? The Chinese economy is an overgrown teenager relatively speaking. Will they be ready for the inevitable bumps along the way?
Good comparison. I still think we face more mature adversaries in this day and age. Russia took over Crimea without our intelligence services even knowing about it until it was too late. China decimated a whole range of our sources inside China where will take years for us to even catch up. These purchases are not from friendly countries, here you have state owned companies purchasing all over the world. I mean you have chinese sourced parts in various technologicial/industrial/military hardware. Whoever is doing our bidding is thinking in short sighted manner.
Either way, I think the Chinese auto industry has a bright future and will be a contender in a decade.
The pursuit of “maximum profit” will be our undoing. Corporations justify this by saying their responsibility is to maximize shareholder value, but that’s a lie. Corporations need to consider multiple stakeholder groups – employees, communities, the environment, etc. – not just shareholders. But in the short-sighted greed, American CEOs and boards have sold out their countrymen, moved manufacturing to countries like China and built up their potential adversary’s technical know-how. The Chinese won’t allow their companies to do the opposite; they are no fools. But they are happy to allow American and European companies to employ their people and give Chinese companies the tech they need to one day surpass the West. And that day will come. And we in the West will wonder why we ever allowed it, why we thought it was better for Apple to stockpile an extra $100B instead of manufacturing their products here and keeping their home country people employed.
And no China won’t be like Japan. China has over 1B people and can power its economy on domestic consumption (once they lift enough out of poverty), unlike the relatively low populated Japan that was reliant on an export economy.
Do not forget our awesome politicians that allowed it to happen. They are the best you can buy for some campaign contributions.
The cheap MBs will me made in China, just like all the Volvos
$99 per month lease on MB?
Nah, on a base C-class made in Solvakia/China, I will pass at 99…
I hoped it would not happen…
Chinese Car to Be Built in Europe for First Time
MBGA…Make Belgium Great Again?
MEGA > MAGA
Make Europe Great Again
Who’s going to buy these ugly ducklings in Europe? But they will probably sell them for 10K euros to Russia.
I’m holding out for the happy ending option.
Polestar will reveal its first all-electric car on February 27th