Volvo Explores Closer Ties With Shareholder Geely in China

(Bloomberg) -- Volvo AB may collaborate with Zhejiang Geely Holding Group Co. in the Chinese market, offering the first clues into the Swedish truckmaker’s plans since the Chinese company became its largest investor.

“We see a lot of areas where we feel that Geely can add both insights and competence,” including in the domestic Chinese market and with “certain technologies,” Chief Executive Officer Martin Lundstedt said in an interview.

Volvo Explores Closer Ties With Shareholder Geely in China

Geely invested 3.25 billion euros ($3.7 billion) in Volvo in December 2017, adding to Chinese billionaire Li Shufu’s growing global footprint. Li is the biggest shareholder in Mercedes-Benz maker Daimler AG, owns the Volvo Cars nameplate and controls Lotus sports cars. Geely plans to make Lynk & Co. branded cars in Europe from 2020.

At the time it took the stake in Volvo trucks, Geely said it sought to contribute on electrification, autonomous driving and connectivity to boost development of the Swedish company.

“We have a good relationship and dialogue with our colleagues at” Volvo, Geely said in an email, declining to comment on details at this stage.

Geely Automobile Holdings Ltd., the Hong Kong-listed arm of the Li’s privately-held company, rose 2.2 percent at 3:01 p.m. local time. Volvo rose 0.7 percent in Stockholm.

Daimler Projects

While Daimler and Geely have agreed to collaborate on car-sharing and ride-hailing services in China as well as building the German company’s Smart city cars, Volvo hasn’t so far outlined cooperation projects with the Chinese shareholder. Lundstedt declined to specify any details about talks with Geely.

“Experience and what has been expressed has been very positive,” he said, speaking at the Bauma trade fair in Munich where Volvo presented electric compact excavators and compact wheel loaders that will go on sale next year. The construction-equipment division contributed a third of operating profit last year and generated a 13.4 percent margin on revenue. exceeding the 10.5 percent return on sales at Volvo’s larger trucks division.

Return on Sales
in %
20182017
Volvo Group10.48.8
Daimler Trucks7.26.7
Scania10.110.1

Source: Company press statements

Volvo boosted operating profit last year and raised its dividend, saying in January that it expects demand in key markets to hold up in the face of growing economic uncertainty. Since then, headwinds in Europe have increased, with Brexit unresolved and Italy slipping into recession at the end of 2018. Germany’s economic growth this year is expected to slow to less than half the rate previously expected amid global trade disputes.

Volvo is on “strong ground” to meet any increasing challenges, even as markets are expected to weaken, Lundstedt said.

“Recession might be a strong word, which we already guided for during the fourth quarter report, but some sort of correction is rather expected, actually,” he said.

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