Geely: a trajectory of catching up and multinational growth

Keywords:

Abstract:

In the last two decades, the car industry in China has been fast growing, and booming in the last years. It is diversified both in terms of competitors, (domestic and foreigner), of brands, range of products, innovation, and in terms of control and ownership, spatial localization.
Foreign manufacturers have played a central role in bringing in technology, management know-how, marketing and selling networks, supplying chains. Domestic companies, (State-owned) in the first stage have served as platforms allowing foreign companies, through joint-venturing, to set up their business and to operate on the Chinese market, taking rapidly the lion’s share concerning sales on the domestic market.
The competitive environment, relatively low entry barriers, State and local pro-market industrial policies have allowed domestic companies, both SOE and private to enter the market to increase market shares, first the low end, slowly moving upward to more sophisticated products (electrical vehicles, hybrid cars). Technology and know-how transfers through spill over have accelerated the pace of catching up and the development of new companies. The change of strategy by SOE enterprises from platform strategy to development of own designed brands, government policies to support the car industry sector have modified the conditions of competition on the domestic market. An higher domestic competitive pressure, the relaxation of government rules for exporting capital and the world financial crisis have facilitated foreign acquisitions, either to expand abroad or to acquire new technologies in China, in order to continue to catch up and to scale up on more complex segments.

Geely (or Zhejiang Geely Holding Group) is an interesting case which highlights the strategy of non-State new comers car maker on the domestic market both in terms of entry, growth, diversification, up-grading, acquisition of technology and positioning.

Our presentation will concentrate on the following topics :
- reverse engineering and strategies of technological catching up
- business model
- before the Volvo deal: a consistent strategy of asset-seeking acquisitions: London Taxi and Australian transmission producer
- bargaining the Volvo deal
- financing the Volvo deal: the role of central and local governments
- a two-ways internationalization process: Geely acquiring Volvo; Volvo investing in China: in manufacturing, R&D, education and training.