Geely Buys Volvo: Read The Tea Leaves
Geely Buys Volvo: Read The Tea Leaves
About:Zhejiang Geely Holding Group, Ford Motor’s (NYSE: F) Volvo, Volvo, Ford, Ford Motors, Geely, China Stock Digest, Chinese equities, Jim Trippon, China’s equity markets
(HOUSTON) March 29 – Chinese conglomerate Zhejiang Geely Holding Group announced on Sunday that it will purchase Ford Motor’s (NYSE: F) Volvo unit for $1.8 billion, a move that qualifies as China’s clearest sign to date that the world’s largest country is not content to merely be the world’s largest auto market by number of cars on the road.
“While the recent performance of Ford, both in the showroom and the stock market is impressive, it would be foolish to consider Geely’s purchase of Volvo another run-of-the-mill acquisition,” Jim Trippon, publisher of China Stock Digest and one of the foremost U.S. experts on Chinese equities, said. “Just a few years ago, Geely couldn’t afford to promote its products at the Detroit Auto Show. Now the company is selling 300,000 cars a year and that total should rise to 700,000 by 2015.
“This is a clear signal that China intends to be more than just a bit player on the global automotive stage. The country wants the lead role and very well could have that billing within the next 15 years at the expense of the U.S.”
Ford acquired Sweden-based Volvo in 1999, so the company is taking a substantial loss on the investment while Geely gains one of the most venerable European automotive brands.
“The average car sold in China last year cost just $17,000, so Geely’s move to acquire Volvo is proof positive that the Chinese recognize the quickest way to moving up the automotive food chain is through acquisitions,” Trippon added. “This acquisition proves China isn’t content to only make cheap cars. The country wants and will gain a foothold in the luxury car market.”
Geely is China’s 12th largest auto maker, but the second-largest that is not state-run.
Jim Trippon operates one of the top equity research firms covering all four of China’s equity markets. In 2009, the China Stock Digest portfolio was up 58%.
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