Geely's outbound M&As to affect Korean firms
The Lynk & Co 01 hybrid sport utility vehicle is on display at the Shanghai Motor Show in this April 2017 file photo. The joint venture between Geely Auto and its subsidiary Volvo plans to release plug-in hybrid models and electric vehicles as well. / Courtesy of Lynk & Co
Competition heats up in electric car market
By Park Jae-hyuk
Geely Auto’s aggressive acquisitions of global carmakers are expected to influence Korean companies, given that the Chinese firm’s massive investments are regarded as its strategy for supremacy in the global electric vehicle (EV) market.
The automotive company, which already astonished the world with the takeover of Volvo’s passenger car unit in 2009, has recently become the de facto largest shareholder of Daimler AG, owner of Mercedes-Benz, since Geely Chairman Li Shufu bought a 9.69 percent share for $9 billion last week.
Geely also holds shares in Lotus Cars, a British sports car manufacturer; Proton, Malaysia’s leading carmaker; Terrafugia, the U.S-based aircraft manufacturer; and Volvo’s truck and bus units
After the latest acquisition, the Chinese company said it will strengthen ties with Daimler, so as to vie with Tesla, Google and Uber for leadership in the development of EVs and self-driving cars. Geely also said it will not acquire additional Daimler’s shares for the time being.
Waiting for Geely’s next step, observers expressed different opinions about the expected impact on Korean firms.
Models promote the Hyundai Motor Kona electric sport utility vehicle in this file photo. / Courtesy of Hyundai Motor
Some people expected the Chinese carmaker’s remarks will weigh on Korean EV makers, such as Hyundai Motor, citing Geely has already begun expanding its presence in the global EV market.
Geely and Volvo jointly launched an eco-friendly vehicle brand named Lynk & Co. They plan to release hybrid, plug-in hybrid and electric vehicle models on the global market under the name of the brand.
Although Hyundai has exceeded Geely in global EV sales for now, the former will face difficulties if the latter takes advantage of cooperation with Daimler and Volvo to expand its presence in the international market.
Amid Hyundai’s sluggish sales in China, some observers even said it may have to learn from Geely, which regarded the Korean company as its role model. Following Hyundai’s strategies, Geely has invested in process control and R&D, massively hiring employees from Korean conglomerates.
Geely CEO An Conghui also said his company studied Korean companies’ overseas expansion.
Hyundai and its sister company, Kia Motors, however, have begun following Chinese carmakers to boost their sales in the world’s most populous country.
The Korean automakers developed cars for the Chinese market, offering affordable prices for customers there. They also scouted foreign designers who worked for subsidiaries of global carmakers in China.
Still, some people expected Geely’s partnership with Daimler will bring better results to Hyundai, because the Korean company’s Chinese partner, BAIC Motor, could reset its relationship with Mercedes-Benz.
“Beijing Hyundai has been regarded as less important than Beijing Benz, since BAIC and Mercedes strengthened their ties in development of EVs,” Eugene Investment & Securities analyst Lee Jae-il said. “However, the recent issue will likely force BAIC to seek for balance between its foreign partners.”
The Mercedes-Benz GLC 350 e 4MATIC plug-in hybrid sport utility vehicle is on display at Incheon International Airport in this file photo. / Courtesy of Mercedes-Benz Korea
Impact on auto parts makers
In addition to carmakers, Korean auto parts suppliers have been mentioned as companies that will be influenced by Geely’s outbound merger and acquisitions.
Analyst Lee expected a negative impact on Mando, one of the leading advanced driver-assistance systems (ADAS) providers.
“Mando has supplied suspensions and brakes to Geely, so they were highly expected to boost ties in the field of ADAS development,” he said. “However, if Geely develops autonomous driving technology with the German company, Mando will remain as a conventional auto parts supplier.”
Hanon Systems, which will supply auto parts to Beijing Benz, will benefit from the recent issue on the other hand, according to the analyst.
“Chinese capital investments in Mercedes will upgrade the German carmaker’s status to a higher level there,” he said. “Considering that Volvo’s China sales increased rapidly after Geely’s takeover, sales of Mercedes are expected to grow further.”