You are here

Volvo owner's Chinese unit sees overseas deals fuelling growth

Beijing

BILLIONAIRE Li Shufu's Geely Automobile Holdings Ltd expects the tycoon's overseas bets from Daimler to Lotus and Volvo to help fuel growth as the Chinese carmaker targets new markets.

While Geely is boosting sales and profit in China on demand for its sport-utility vehicles, the company said on Wednesday it's preparing for intensifying competition from both local and foreign brands. That's prompting Geely to look elsewhere, something that Mr Li's acquisitions could prove useful with.

As the industry moves towards electric vehicles and connected online services, Mr Li has built out his empire by acquiring Sweden's Volvo Car Group in 2010 and snapping up stakes in British sports-car maker Lotus Cars and Malaysia's Proton Holdings. Last month, the billionaire disclosed a 9.7 per cent stake in Daimler - making him the Mercedes-Benz maker's largest shareholder. Mr Li has thus far kept those holdings separate from the publicly traded Geely.

sentifi.com

Market voices on:

"The numerous acquisitions in the automobile sector by the group's parent over the past few years should provide the group substantial opportunities for technologies and cost sharing, economies of scale and new market penetration," Geely said in a statement.

"Longer-term, these acquisitions should provide additional sources for growth of the group."

Mr Li has ambitions of making Geely into a global major and as part of that plan, he unveiled the Lynk & Co in 2016, a brand that targets young customers. Western brands such as Mercedes-Benz and Volvo are further along than Geely with new technologies including connected online services and self-driving features.

Geely also posted net income of 10.6 billion yuan (S$2.2 billion) for 2017, more than doubling from the previous year on rising sales of sports-utility vehicles including the Boyue. Analysts had predicted 9.99 billion yuan on average.

Shares of Geely fell 2.9 per cent at 1.30pm in Hong Kong. They're little changed this year after more than tripling in 2017.

Even with rising sales, Geely warned that competition in China is getting tougher and changes in tax legislation could weigh on demand this year.

"While we remain optimistic about the growth prospects for the Chinese passenger vehicle market, the elimination of purchase tax subsidies for fuel efficient vehicles from January 2018 could have some negative impact on the sales volume growth of passenger vehicles in China during the early part of the year," the company said. BLOOMBERG