Possible merger between Volvo and Geely Automobile

Volvo recently announced its intention to merge with Geely Automobile. This would create a group with enough resources to compete with the major brands in the automotive industry.

Rumours of a possible merger between the FCA and Renault groups circulated some time ago. However, the Italian-American group never finalised the deal and ultimately merged with PSA Group. This union created one of the world’s foremost powerhouses in motoring. Since then, many brands have been looking for partners to compete against the industry giants. Volvo is the latest to join negotiations for a merger with another powerful group, in this case Geely Automobile.

The group would consist of the following brands

Geely Automobile is China’s leading car manufacturer and the sole shareholder of Volvo. Both companies aim to accelerate technological and financial synergies, creating a strong global group. The resulting group would benefit from the profits, resources and technology of each company. It would comprise a total of five brands: Volvo, Geely, Lotus, Lynk & Co and Polestar. The group would also gain access to the capital markets, first through the Hong Kong stock exchange and later through Stockholm.

Volvo’s goal is to grow its capital in order to climb higher in the ranking of leading automotive names. The fastest-growing market niche today, electric mobility, is not the Swedish firm’s strong point. For this reason, through this possible merger, Volvo could secure the funding needed to start competing head to head with mainstream brands that are several rungs above it.

According to Volvo spokesperson Stefan Elfström, each company needs the other for major investments. The aim is technological improvement to consolidate new operations and to be able to manufacture and produce more and better.

The Chinese group acquired Volvo Cars at a good time (for the buyer), as the Swedes were suffering absolute losses. The poor state of sales, production and, ultimately, the finances was completely reversed once the Asian group arrived to integrate them. Since then, the Europeans have returned to an upward trajectory, to the point that they reached their highest-ever annual sales.