Geely Gobbles Automotive Companies

How many people in the West even know what Geely is?

Perhaps in Europe, where the Chinese auto manufacturer also owns Volvo, a majority share of Lotus, and now a 10% share of Daimler (itself the parent of Mercedes-Benz).

CNBC reports that Geely Chairman Li Shufu purchased the stake in Daimler because:

“‘No current car industry player is likely to win this battle against the invaders from outside without friends. To achieve and assert technological leadership, one has to adapt a new way of thinking in terms of sharing and combining strength. My investment in Daimler reflects this vision,’ Li said.”

In case you’re not clear what that means:

“Only two or three manufactures will likely survive in the auto industry going forward, a source familiar with Li’s thinking told Reuters, prompting Geely to seek access to carmakers with a technological edge.”

The line between Li Shufu and Geely is a little fuzzy here, as CNBC reports that Li made the share purchases, but Geely now has access to Daimler’s technology.

It looks like there are a few things happening:

  1. Geely wants access to Daimler’s battery technology, in advance of upcoming Chinese quotas for electric vehicles.
  2. Geely’s ownership of Volvo has seemed to work out well, so it makes sense that they might continue their European expansion.
  3. Perhaps Geely is hedging its bets by owning several different automotive manufacturers, on the theory that at least one will survive the transition to autonomous vehicles.

On the other hand, if Li really does believe only a few manufacturers will survive the next few decades, then it is surprising that he would make major acquisitions now, when automotive company valuations are at close to all-time highs.

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