Frost & Sullivan: Geely Pins High Hopes on Volvo

LONDON – 21 April, 2010 - Better known for in-expensive and small cars in its domestic market, China’s Geely now has a premium European brand in its stable thanks to which it can access Volvo’s quality and cutting-edge technology, enhance product line-up and increase domestic brand differentiation. This merger is a strong strategic fit, feeding Geely’s ambition to be a global player while allowing Volvo to achieve a significant competitive structure within the European automotive industry through low-cost sourcing. The partnership also enables both parties to enhance their co-operation on alternative propulsion in both the European and Chinese markets.

However, sufficient care must be taken to align a clear integration strategy with suppliers/vendors and, more importantly, to ensure the cross-cultural integration and human resource management between the two carmakers. “Geely’s promise to keep the “Volvo-ness” unique and intact by not mixing Geely with Volvo is crucial,” argues Aswin Kumar, Senior Research Analyst in Frost & Sullivan’s Automotive & Transportation Practice in a new article entitled Volvo for Geely – Global Footprint for China’s Henry Ford!

Moreover, considering some of the failed deals in automotive history, (Daimler-Benz and Chrysler, Ford and PAG, SAIC's Ssangyong) this potentially symbiotic relationship too could create more challenges than advantages. “Geely must ensure that it does not repeat the mistakes of its predecessors and should take care to avoid misalignment of product lines, conflicts of interest and mismanagement,” warns Kumar.

Geely hopes Volvo will help it crack China’s fast-growing luxury car market and wrest some of the lucrative Chinese government vehicles procurement market away from Audi. It also wants to build its brand name and experience in managing both mass-market and luxury vehicles in its portfolio. “The deal is expected to help Geely leap-frog in technology and have a leg up against domestic competitors that are buffered by government support or operate through partnerships with foreign OEMs, securing access to technology and finance,” concludes Kumar. “With Volvo’s well established supply chain and existing R&D talent, Geely has ensured that it stays well-ahead of its domestic competitors.”

Electric Vehicles Unplugged 2010: taking place at the House of Lords and at the Society of Motor Manufacturers & Traders in London on June 22 - 23, will bring together key decision makers including Government, OEMs, Supplier Infrastructure companies and Major Fleet Managers, to provide insights into the structure of new business models and their implications for industry stakeholders. This unique workshop will also allow attendees to understand the position that key industry players are taking towards infrastructure and to debate the pros and cons of different solutions in development across Europe. If you are interested in joining us at this event, whether as a sponsor or an attendee, please contact Monika Kwiecinska, Corporate Communications for Frost & Sullivan in Europe, at monika.kwiecinska@frost.com. For more information you can also visit http://www.frost.com/evw10

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