GEELY AND VOLVO

WHY ARE CHI NESE COMPANI ES DOI NG M&A?

GEELY I S HUGE I N AFRI CA
REASONS/ MOTI VATI ONS
OF ACQUI RI NG VOLVO?
1
STRATEGY FROM 2007 ONWARDS:
I MPROVE QUALI TY AND MARKET
SHARE.
VOLVO WI L L BE GEELY S 3RD M&A/ J V
TO ENTER
I NTERNATI ONAL
MARKET
L I KE FORD, GEELY I S PROBABLY
L OOKI NG I NTO OBTAI NI NG
TECHNOLOGI CAL EXPERTI SE
I N SECURI TY,
SAFETY AND
ENERGY
CONSERVATI ON
M&A I S BACKED FI NANCI ALLY BY
GOVERNMENT AND MANAGED BY GSCP
FI NANCI AL
STABI L I TY
REASONS/ MOTI VATI ONS
OF ACQUI RI NG VOLVO?
1
CHANGE I N MARKET STRUCTURE
DEMAND FOR
FOREI GN LUXURY
CARS I NCREASES
GL OBAL ECONOMI C CRI SI S REDUCED
VAL UATI ON OF VOLVO, MAKI NG I T
MORE APPEAL I NG AND CHEAPER FOR
GEELY
REALI SI NG I TS
LONG TERM PLANS
Geely rank = no. 9 (4%)
Volvo rank = n/a (0.33%)
Volvo share of
luxury car market in China
= no. 4 (5.3% - 24k sold)
Source: McKinsey (2014). State of Chinese Autoobile Market
ADVANTAGES AND
DI SADVANTAGES FOR VOLVO
2
PROS














L EVERAGE SCAL E EFFECTS
I N GL OBAL MARKET
L EVERAGE LOCAL
PRODUCTI ON I N CHI NESE
MARKET
GEELY HAS OTHER
SUCCESSFUL J V/ M&A -
ENSURI NG FRUI TFUL
ACQUI SI TI ON
CONS













GEELY MI GHT HAVE
OTHER UNDERLYI NG
I NTENTI ONS
VOLVO MI GHT L OSE
I TS TECHNOL OGI CAL
COMPETENCI ES
FRESH CAPI TAL I NJ ECTI ON
VOLVO MI GHT BE
PRESSURED TO
TURNAROUND I TS BUSI NESS
QUI CKLY
ADVANTAGES AND
DI SADVANTAGES FOR GEELY
2
PROS














I MPROVE PRODUCT QUAL I TY
TO BE MORE COMPETI TI VE
I N CHI NESE MARKET
I NCREASE OVERSEAS
MARKET SHARE
BETTER OPPORTUNI TY TO
SEL L OVERSEAS THROUGH
VOLVO S DI STRI BUTI ON
CHANNELS
CONS













HUGE FI NANCI AL
PRESSURE TO REVI VE
VOLVO BRAND - $1. 8BI L
GEELY BEI NG A YOUNG
COMPANY, ONLY 13
YEARS EXPERI ENCE
OPPORTUNI TY TO
ADVERTI SE I TSEL F TO THE
WORL D
DI FFERNT CULTURE I N
TERMS OF MANAGI NG
EMPL OYEE WEL FARE -
SCANDI NAVI A VS CHI NESE
A CHI NESE
GOVERNMENT
I NI TI ATI VE
TO CATALYSE
LOCAL
I NDUSTRI ES/
FACI LI TATE
TECHNOLOGY
TRANSFER
I NSI GHTS ON WHY?
2
FOR A FOREI GN CAR MAKER TO SEL L
I TS CARS I N CHI NA
CHI NA HAS BEEN THE WORL D S L ARGEST
CAR MARKET SI NCE 2008, WI TH OVER 18
MI LLI ON CARS PRODUCED AND SOLD
EACH YEAR.
China Association of Automobile Manufacturers (2013). Annual Report.
Euromonitor (2014). Passport.
I MPORTED CARS- TAXES AND TARI FFS
RANGI NG FROM
40% - 300%
The Economist. (2008). Car Taxes in China
ONLY WAY TO CI RCUMVENT THI S I S TO
J OI NT VENTURE WI TH LOCAL
MANUFACTURERS/ CARMAKERS
RECOMMENDATI ONS
I NTEGRATE VOLVO S VAL UE CHAI N
EXPERTI SE
3
VOLVO S SCANDI NAVI AN DESI GN TEAM
COL L ABORATE TO J OI NTLY
DEVEL OP DESI RABL E CARS
VOLVO S DI STRI BUTI ON METHODS
USE I T TO DI STRI BUTE
GEELY CARS AS WEL L
RECOMMENDATI ONS
I NTEGRATE VOLVO S VAL UE CHAI N
EXPERTI SE
3
J OI NT R&D COL L ABORATI ON AND
ENGI NEERI NG DEVELOPMENT
COL L ABORATE TO SAVE
COST ON DEVEL OPI NG A
SHARED PARTS PL ATFORM
J OI NT MATERI AL AND PARTS
SOURCI NG
COMBI NG SOURCI NG
ACTI VI TI ES TO I NCREASE
BUYI NG POWER & ACHI EVE
VOL UME ADVANTAGE
RESULT - >1. 5MI L
CARS SOL D
WORL DWI DE
EXAMPLE:
PERODUA MYVI
COLLABORATI ON
L EAN
MANUFACTURI NG
PRACTI CES
DESI GN CUES
ENGI NEERI NG EXPERTI SE
OF SMAL L CARS
Source: Daihatsu (2013) Annual Report. Toyota (2013). Annual Report
Malaysia Automotive Association (2012). Annual Sales and Figures