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From a refrigerator parts company to a global leading automotive giant: the story of Geely

On one of China´s most impressive corporations and the path of internationalization

· mobility

{{{Enno Heese}}}

With ever-larger local markets and increasing competition, in the last few years an increasing number of Chinese companies embarked on global expansions. One of them is Geely. Over the last 34 years, Geely transformed its business in China several times to emerge from a refrigerator company to an automotive giant. When Geely acquired Volvo from Ford in 2010, it entered the world stage of the car industry. Since then, Geely refined its model and approach as it faces opportunities and challenges alike in its ambitious attempt to become a global enterprise.

Li Shufu has great ambitions. In 1986 he founded Geely in China as a manufacturer of refrigerator parts and now - 34 years and many investments later - he is leading over 120,000 people. Today, his Zhejiang Geely Holding Group is best known in the West as the owner of Volvo Cars and as the largest shareholder of Daimler AG and Volvo Cars' former parent company AB Volvo.


In this article I illustrate the internationalization process of Geely and show how a private Chinese company strives to become one of the top players in the automotive industry.

Acquisitions have been the most important growth factor in the past

The history of Geely is quite complex due to the innumerable investments and the many sub-companies that have been established over the years. The following section is therefore only a rough summary of the most important steps, so that the multifaced development of Geely becomes as compact as possible.

After its foundation in 1986 as a refrigerator parts manufacturer, Geely has been producing and selling motorcycles since 1994, followed by the production of its first passenger cars from 1998. In 2006 Geely bought 20% of the manufacturer and owner of the London Taxi Company, an English taxicab manufacturer. After the equity acquisition, the two companies formed a joint venture which enabled Geely to produce and sell the classic London Taxis in China. Geely acquired 100% of the Volvo Car Corporation from Ford in 2010, and Li Shufu announced that Volvo was going to be largely independent of Geely due to cultural differences. In 2013, 100% of the assets of the manufacturer and owner of London Taxi were acquired. In 2015 the CAOCAO ride-hailing service was launched and the Polestar brand was purchased, closely followed by the founding of the global car brand Lynk & Co in 2016. Already in the following year Geely acquired 49.9 % of the Malaysian car manufacturer Proton and 51 % of the British car manufacturer Lotus. Armed with USD 3.3 billion Geely acquired in the same year 8.2 % of the shares and 15.6 % of the voting rights in AB Volvo, the commercial vehicles and industrial engineering group. In 2018, Li Shufu acquired a 9.7 % stake in Daimler AG for USD 9 billion. As with London Taxi before, Li Shufu could convince Daimler in 2018 to form a ride hailing joint venture. The next year Geely creates the purely electric car brand Geometry and a joint venture with LG Chem to produce batteries. In 2020 Geely and Daimler established a joint venture that owns the car manufacturer Smart, followed by Geely's impactful announcement of planning to completely merge the culturally different Geely Auto and Volvo Cars. This essential merger has now been postponed, in order to go public as a newly merged company with better sales after the coronavirus pandemic.

Reasons for Geely to gain growth through internationalization

The internationalization of Geely is characterized by a fast, risky and continuous pursuit of the ambition to become a top player in the automotive sector. Over the last 15 years, international acquisitions have been the main reason for the growth. Geely is one of the first Chinese car manufacturers to successfully internationalize its business. This will be a frequently observed behavior in the future, because the motives for internationalizing Chinese companies will become more important in the future. Even the comparatively huge Chinese automotive market - Volkswagen is able to sell half of its vehicles in China - is slowly saturating. Geely is a pioneer of a future Chinese trend based on the well-known main motives to internationalize:

  • Strengthening global and local competitiveness. Geely, like many Chinese companies, moved from relatively small production and assembly operation with lower skill levels to a more innovation-oriented company. This trend can be continued with more expertise and resources from foreign markets and a larger sales volume, so that higher quality products can be sold at lower prices.
  • Pursuing potential abroad. Geely's core competence - offering quality cars at a reasonable price - and Volvo's core competence - producing understated, luxurious and safe cars - result in product offerings that are not offered at this level in all markets.
  • Diversifying risks. The Chinese market is growing, but at an increasingly slower pace. In order to be prepared against downturns, products should be offered in at least a few of the major world markets.

Additional accelerating factors in the case of Geely are:

  • Intense competition in the Chinese market. The Chinese market created many large domestic car manufacturers. The vehicles being offered have reached such a level of quality that many manufacturers now see potential abroad. BYD now offers the BYD Tang in Norway, Nio is currently working on his international reputation in the FIA Formula E Championship and Wey is trying to start an international strategy with emotional design.
  • Knowledge disadvantage. Especially in Germany and the USA, car manufacturers had a lot of time to gather knowledge since the production of their first vehicles. The gained knowledge has been gathered and is used, for example, to improve technologies or company processes. This considerably increases competitiveness. Experienced employees can help internally with their know-how and externally there are many former employees in German universities who are now teaching the next generation. Geely in particular and China in a broader sense lacks parts of this knowledge.

After diversifying its domestic business, Geely has started to internationalize more. The acquisition of Volvo Cars was another major step towards becoming a global group. However, due to strong resistance in Sweden, Geely had granted Volvo a large degree of operational independence. The acquisition and only partial merger of Volvo helped Geely to gain:

  • Economy of scale. These are the cost advantages achieved through the unit sales volume. In the automotive industry, the costs per vehicle fall significantly as the volume increases. In aircraft production, these cost advantages are so elementary that only two large manufacturers can survive in the relatively small market.
  • Knowledge. Volvo is a traditional company that has been able to gather a lot of knowledge. This knowledge ranges from the company structure with its established best practices to vehicle development with its registered patents. Furthermore, Volvo's employees have always been working on improving vehicles in main aspects like safety. Volvo's research and development department could make good use of Geely's support in difficult times, while Geely could make good use of the technologies developed at Volvo.
  • Volvo brand. For many decades, Volvo vehicles were able to establish themselves as understated, luxurious and safe. The evidence of the low mortality rates in Volvo vehicles has spoken for itself. Combined with a unique design and good marketing has led to this good reputation.

Additional acquisitions like Lotus and Proton have further expanded access to international markets. Geely positioned itself more diversely with investments in the electric vehicle manufacturers Polestar, Smart and Geometry and the mobility services providers Caocao and StarRides. With the investments in the satellite manufacturer Geespace and the flying car manufacturer Terrafugia, Geely is also trying to shape the future of mobility faster than its western competitors. Geely started recently to use the obtained partnerships and reputation to focus on collaborations instead of acquisitions, as seen with the joint ventures StarRides and Smart with Daimler AG. Although Geely has not yet been able to enter into a partnership with Volvo AB since the investment in the company, but AB Volvo stated that a meaningful partnership is possible in the future. In addition, Geely Sweden Financials Holding AB has borrowed USD 451 million in 2019 in a zero-coupon bond due 2024, which indicates possible further investments in Sweden.

Fully merging with Volvo confronts Geely with challenges in difficult times

Geely has decided to fully merge its subsidiaries Geely Auto and Volvo Cars. This has already been postponed because of the Corona crisis, but it would fit very well into the path towards becoming a leading international automotive group. Therefore, a later realization is likely, which can lead to the desired cost reduction effects, but the cultural and geographical differences are a major obstacle to be overcome. Geely is currently working on a global corporate culture that suits both Swedish and Chinese employees. The typical capabilities of the Chinese corporate culture, which they will have to try to keep, include

  • improving outside technologies
  • overcoming significant constraints on business activities
  • valuing new knowledge
  • obtaining resources from outside institutions.

Lu Shufu has come a long way, but he cannot afford to lose the advantages of Volvo and Geely with a badly designed merger. He needs to maintain Geely's existing advantages - cost, speed and the ability to identify, develop, and utilize all networks - while learning endurance, efficiency and quality from Volvo.

It will also be difficult for Geely to invest heavily in the cultural and organizational link between Volvo Cars and Geely Auto. The current transformation of the automotive industry gives Geely the chance to stand out with well-developed cars. Therefore, a substantial amount of money and time is already needed to develop, produce and market the cars. The pressure to survive in the future automotive market is high. Especially since only a few vehicles are being sold due to the coronavirus pandemic and therefore only limited profits have been made so far.

Obtaining the necessary acquisitions and partnerships can be difficult

It is particularly difficult for Chinese companies to be accepted abroad. Geely will find it harder than other global competitors to forge good partnerships. The takeover of Volvo Cars shows how even in Sweden, which is one of the most open and liberal Western societies, the majority of the media will view the takeover by a Chinese company negatively. Although at the time of the takeover the struggling company was no longer Swedish, but had been owned by Ford for 19 years, the media reported negatively. It was only after Volvo Cars' sales and profitability had risen significantly that the media took a partly positive view of the takeover.

Chinese companies must succeed in changing their image from a cheap copycat to a technically and qualitatively sophisticated manufacturer. Geely and many other Chinese companies have already gone this way, but as before with Japanese companies, the image change will only slowly succeed. If this cannot be achieved fast enough, Chinese car manufacturers may find it very difficult to prove themselves in the evolving automotive market. Similar to the aircraft market, the automotive market will allow fewer and fewer manufacturers because of high development costs for the electrified, autonomous and connected automotive future.

Geely can rely on modern design to develop its international sales

If Bob Lutz, the former executive vice president of Ford, former president and then vice chairman of Chrysler and former vice chairman of General Motors, is to be believed, there are no more bad cars today. Instead, what counts is the design. I don't quite share Bob Lutz's opinion, especially at a time when technologies are still developing fundamentally. However, from my own experience I can confirm that since moving to Beijing, I wanted the popular Qin Pro EV from the Chinese car brand BYD for only USD 25,000 without knowing much about the technology.

Geely has shown that they can create a coherent product for both the Chinese audience and the Western audience. Volvo in particular has shown how Geely can bring the brand back to success with good design. Globalization is leading to increasingly similar tastes in product design, which makes it easier and easier to market vehicles in the West. But due to the isolation of Chinese software, complex and immersive software design has become established in China. Internationally, the minimal and functional American software design has established itself. This fundamental difference in taste may make it difficult for Geely to find the right automotive design in the future. If Geely makes mistakes here, this can have more far-reaching consequences for international sales than, for example, a less advanced chassis.

Broad market coverage with minimal overlaps can lead Geely to stable success

With the brands Polestar and Geometry, valuable electrical competencies are being built up. With the Volvo and the Lynk & Co brands, desirable cars act as brand ambassadors and drive technology leadership. The Proton and Geely brands are used to build good and affordable cars. The Lotus and Smart brands occupy interesting niches. Similar to the huge Volkswagen Group, for example, the entire Geely Group can benefit from synergies and economies of scale through the cooperation of brands. Advanced technology can first be advertised as technology leader in a Lotus at a high price, and then later be installed in a Geely at low cost. Through partnerships with Daimler AG and AB Volvo, the high costs of expensive research could be further shared. As a Chinese company, Geely has the advantage of short distances to Chinese software companies. With Baidu, for example, there is already a partnership in place with Geely Auto, while Volvo Cars partners with Google's Waymo to handle autonomous driving. Another way to keep development costs low is currently being tested at Lynk & Co with a stronger vertical integration of sales.


Geely has undergone rapid expansion over the last 15 years. Due to the acquired growth in the past, the ambition to become a top player in the automotive industry seems not unlikely. Arguments for achieving the ambition are:

  • Reputation as a future global player. Large financings up to this point were made possible by this reputation, so that Chinese and also foreign investors like Goldman Sachs were happy to invest.
  • Profitable core business. Geely offers quality cars at a reasonable price and Volvo offers understated, luxurious and safe cars. There are experiments like the sub-company Geespace, but the core of the holding is profitable.
  • Good relationships. The financial sector enabled Geely to buy Volvo. Numerous players in the international automotive industry now have partnerships with Geely. This is not only possible with a profitable business, but with contacts who help to initiate partnerships.
  • Quick adaptability. This is a typical strength of companies from an emerging market. But Geely has especially refined the ability to navigate around the difficulties that arise between the company and the objective. Progress is constantly being driven forward with many steps.
  • International design. Geely is aware of the importance of design and has appointed Chief Design Officer Volvo Cars Thomas Ingenlath as CEO of the new electrical brand Polestar. Peter Horbury, who is the Executive Vice President of Design at Geely Auto Group, has just won the 2020 Lifetime Achievement Award by Autocar, a leading automotive magazine in the UK.
  • Good market coverage. The various brands cover many of the different types of vehicles in the automotive market. Important gaps such as battery production or self-driving technology are covered by partnerships.

Arguments against achieving the ambition are:

  • Limited resources for big ambitions. The numerous joint ventures and partnerships require considerable coordination. Likewise does the internal separation of the company into many locations and sub-companies. Fully merging the cooperate structure between Geely Auto and Volvo Cars will also occupy needed resources.
  • Chinese origin. The bad image of Chinese companies in the west will continue to make it difficult to obtain significant partnerships. Geely has nevertheless been able to establish many partnerships so far, but the bad reputation remains an obstacle to be overcome, even for the private Zhejiang Geely Holding Group.
  • Focus on Chinese market. The rapid growth was partly due to the now stagnating Chinese market. Many vehicles of the holding are only sold in the Chinese market. The internationally available vehicles are carefully designed with the requirements of Chinese customers in mind. There are localizations offered, such as estate vehicles, but Geely still has to be careful to offer products for the taste of international customers.
  • New type of growth. A large part of the past growth was acquired. Now, a second growth phase is beginning in which the customers' image becomes even more important. Geely has to be careful that they do not degrade to a hardware manufacturer due to their dependence on partnerships. There will always be cheaper competitors who can produce hardware. However, founder Li Shufu has criticized the other Chinese car manufacturers for exactly this reason.

It will remain interesting to see how Geely will address the upcoming challenges and build their stand against international competition, but whatever the outcome, they will enrich the automotive landscape with their very own style.

All opinions expressed in this article do reflect my personal views only.

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