China’s Geely aims to become a force in electric cars By Reuters


2/2 © Reuters. FILE PHOTO: A Geely Auto Research Institute building is seen in Ningbo 2/2

By Yilei Sun and Brenda Goh HANGZHOU, China / SHANGHAI (Reuters) – Like many others in his industry, Geely Chairman Li Shufu has been angered by the elevated valuations of electric car makers like Tesla (NASDAQ 🙂 Inc and Nio (NYSE 🙂 Inc, say sources at the Chinese automaker. Bringing Geely, which owns Volvo Cars and 9.7% of Daimler AG (DE :), to a place where it can also claim a sizable chunk of China’s burgeoning electric car market and improve its share price at the same time , has worried Li for a long time. last year, they added. The result: a series of deals unveiled last month that reveal Geely’s intention to position itself as the benchmark contract manufacturer for electric vehicles in China and beyond, assembly services that will also offer its engineering and development expertise. “The president’s attitude towards contract manufacturing is clear – he is actively embracing and pursuing it,” a Geely executive told Reuters. Outsourcing the production of some models through original equipment manufacturing (OEM) agreements is common in the auto industry, but Geely’s plans represent the most aggressive attempt yet by an automaker to build a business. of contract manufacturing. Of the four announced deals, a company with Taiwan’s Foxconn to provide contract manufacturing of electric vehicles (EV) is the most important, said the sources, who were not authorized to speak to the media and declined to be identified. The venture with Foxconn would be tasked with a subsequent deal to build mass-market electric vehicles for Los Angeles-based startup Faraday Future. Geely, which is China’s largest privately-owned carmaker, has also made a separate pact to make smart electric cars for internet giant Baidu Inc (NASDAQ :), with the first model due to launch next year. In addition, it is joining Tencent Holdings (OTC 🙂 Ltd in intelligent vehicle control and autonomous driving technology. Geely declined to comment for this article or make Li available for comment. PROS AND CONS Geely has several models of electric cars on the market and in September it launched a new platform focused on electric vehicles, developed at a cost of 18 billion yuan ($ 2.8 billion). But amid a two-year slump in sales, Li became convinced that Geely was being overly conventional in its approach and began pushing for aggressive adoption of “Big Tech” partnerships, the sources said. In doing so, Li returned to more active management of the group after backtracking somewhat in 2017 and 2018. The change did not come without some opposition. In management meetings, some people expressed concern that any big shift toward contract manufacturing could make Geely a minor partner in its dealings with technology companies and lose its edge as an independent automaker, they said. senior sources. Caution was also expressed about choosing Faraday Future as the first client for the company with Foxconn, as the startup has a track record of overly promising and slow progress in development. Li dismissed those concerns, they added. The deal with Faraday was not well received by the market and shares in its main unit, Geely Automobile, fell 16% in four days on the news. On the bright side, however, the deals could address chronic underutilization at Geely plants. For example, Geely Automobile, which houses its Geely-branded cars, is capable of making more than 2 million vehicles a year, but sold just 1.3 million in 2020. The deals could also help Geely make the most of the platform focused on electric vehicles. which is now open source and can be used for small and large cars and even light commercial vehicles. That said, it is uncertain how large contract manufacturing will be for Geely and the company has no internal numerical targets to meet at this time, sources said. “It’s basically unclear now how many clients we will have in the next few years,” said a source. Li also plans to shore up Geely’s financial base with a secondary listing for Geely Automobile on the continent’s STAR dashboard this year. Its Hong Kong listing values ​​the unit at $ 37 billion, and the stock is up more than 12% so far this year. That, sources say, has been a deeply unsatisfactory state of affairs for Li, who compares it to the valuation of more than $ 800 billion for Tesla and the valuation of $ 98 billion for Nio, which sold fewer than 44,000 cars last year. last year. Geely had considered investing in Nio before, sources said. Analysts describe the flood of new deals as bold, which could save Geely a lot of time and money on the development and launch of electric cars. At the same time, there are risks. “Integrating a major partner is challenging enough for the management of any company, regardless of industry, so asking the management team to launch them all at once successfully is a pretty big question,” said Tu Le, Sino Auto Insights analyst. (This story corrects the typo in the president’s name in paragraph 1.)