Volvo is becoming a little more independent from its parent company Geely: the Swedes want to take over all of their activity in China on their own, the Chinese will therefore be bought out of the joint venture for an undetermined amount.
It is said that the two companies have agreed on this point. Volvo will become the first major foreign automaker to take full control of its business in China, CEO Håkan Samuelsson said.
If the authorities agree, the Swedes would become sole owners of two auto factories in Chengdu and Daqing as well as a research and development center in Shanghai and the local sales company. According to Volvo, the deal is expected to be concluded in two stages starting next year and finalized by 2023.
The deal between the parent company and the subsidiary is seen as a further step towards a possible Volvo IPO. Geely boss Daniel Li said last month that he expected the Stockholm Stock Exchange listing to move “fairly quickly”. Experts estimate that the longtime Gothenburg company could then be valued at around $ 20 billion. “The clearer the ownership structure and the clearer it is who pursues what interests in the business, the easier it is for investors to judge where they are putting their money,” said Hampus Engellau, capital markets analyst at the Swedish bank Handelsbanken. In this regard, full control of the activities in China could make a possible listing of Volvo more promising.
The now-agreed deal is made possible by new requirements in the People’s Republic: from next year, the obligation for foreign car manufacturers to cooperate with a local manufacturer there will no longer apply. Since it became clear that the restrictions should be lifted, German rivals Volkswagen and BMW have also announced that they want to buy larger stakes in their Chinese joint ventures. The relief has been in place for manufacturers of pure electric cars since 2018. For example, Tesla has already been able to open a factory in the country and sell its vehicles there without a local partner.
The Geely Group, which also owns just under 10% of Daimler, bought Volvo Cars from US automaker Ford shortly after the 2010 financial crisis. So far, however, Swedes are still relatively small in the Chinese market. . Last year they sold around 166,000 cars there. For comparison: VW sold just under a million cars in China in the first quarter of this year alone.