Geely wants to rationalize its acquisitions
Geely, which owns the two brands Lynk & Co and Zeekr as well as 10 other automobile brands, has abandoned its strategy of aggressive acquisitions to concentrate on streamlining its operations and reducing costs.
Group Chairman Eric Li told his employees in September that to improve efficiency and reduce costs, extensive business integration was necessary. He added that all brands in the group needed to clarify their positioning to avoid overlap.
Geely said it wants Zeekr and Lynk to form a new new energy vehicle manufacturing group, with combined annual sales of more than 1 million units, up from around 339,000 vehicles for the two brands in 2023.
“If we don't integrate (Zeekr and Lynk), we will have to face problems like internal competition… and redundant investments in areas like R&D, sales, which is stupid,” he said. said Gui Shengyue, chief executive of Geely Automobile Holdings, in a conference call with analysts following the announcement. “If we don't do this, Geely's overall competitiveness will definitely not improve. »
Zeekr stake purchase from Volvo and Geely
The deal sees Zeekr purchasing a 30% stake from Volvo Cars and a 20% stake from Geely Holding. Zeekr will then increase its stake to 51% through a capital injection, while Geely Auto, the group's main listed arm, will retain the rest.
The transaction values Lynk at around 18 billion yuan ($2.5 billion). It should be finalized by June next year, according to a source close to the matter. Volvo Cars shares rose 3.5% in early trading, among the biggest risers in the pan-European STOXX 600 index.
Zeekr's US-listed shares, meanwhile, fell more than 7% in pre-open trading.
Sharing resources and developments
Within the group, Zeekr is expected to lead innovation for electric and connected vehicles, sharing this research with other brands including Lynk and Polestar, according to two sources.
Lynk's product team began reporting to Zeekr CEO Andy An last week, and there have been discussions about using technologies and components shared by the two manufacturers.
Sharing resources would reduce R&D costs by 10% to 20% for Zeekr and Lynk combined, reduce material costs by 5% to 8% and improve production capacity utilization, Zeekr CEO said during a conference call with analysts on Thursday.
Attractiveness of the Lynk sales network
This would also help Zeekr brands sell in second-tier cities through Lynk's sales network in these regions.
Lynk's latest two electric models, the Z10 and Z20, share the same architecture as Zeekr's vehicles, while its gasoline and hybrid models use different platforms developed by Geely and Volvo Cars.
Launched in 2016, Lynk, which currently has nine models, sold around 195,600 vehicles in the first nine months of the year, up 40% from the same period last year.
In comparison, Zeekr, a brand born three years ago, sold nearly 143,000 vehicles from January to September with six models, an increase of 81%.
Zeekr shares have soared nearly 40% since its listing on the New York Stock Exchange in May, bringing its market capitalization to $7.3 billion.
Sources : Reuters
