China tycoon’s Geely sees global deals fuelling growth

Bloomberg

Billionaire Li Shufu’s Geely Automobile Holdings Ltd. expects the tycoon’s overseas bets from Daimler to Lotus and Volvo to help fuel growth as the Chinese carmaker targets new markets.
While Geely is boosting sales and profit in China on demand for its sport-utility vehicles, the company said it’s preparing for intensifying competition from both local and foreign brands. That’s prompting Geely to look elsewhere, something that Li’s acquisitions could prove useful with.
Shares of Geely fell 6.2 percent after the company said sales in China will also be pressured by changes in car-purchase taxes, underscoring its reliance on its home market. As the industry moves towards electric vehicles and connected online services, Li has built out his empire by acquiring Sweden’s Volvo Car Group in 2010 and snapping up stakes in British sports-car maker Lotus Cars and Malaysia’s Proton Holdings Bhd.
“The numerous acquisitions in the automobile sector by the group’s parent over the past few years should provide the group substantial opportunities for technologies and cost sharing, economies of scales and new market penetration,” Geely said in a statement. “Longer-term, these acquisitions should provide additional sources for growth of the group.”
In February, Li disclosed a 9.7 percent stake in Daimler AG—making him the Mercedes-Benz maker’s largest shareholder.
The billionaire has thus far kept his overseas holdings separate from the publicly traded Geely.
Li has ambitions of making Geely into a global major and as part of that plan, he unveiled the Lynk & Co in 2016, a brand that targets young customers. Geely could start manufacturing at a Volvo plant in Belgium, and President An Conghui said the company will unveil a strategy for the US market this month.
With such plans, expertise from Mercedes-Benz and Volvo could prove valuable. Those manufacturers have a long history in serving western markets and are further along than Geely with new technologies including connected online services and self-driving features.
Geely also posted net income of 10.6 billion yuan ($1.67 billion) for 2017, more than doubling from the previous year on rising sales of sports-utility vehicles including the Boyue.
Analysts had predicted 9.99 billion yuan on average.
Even with rising sales, Geely warned that competition in China is getting tougher and changes in tax legislation could weigh on demand. China phased out a purchase-tax incentive at end
of 2017.
“While we remain optimistic about the growth prospects for the Chinese passenger vehicle market, the elimination of purchase tax subsidies for fuel efficient vehicles from January 2018 could have some negative impact on the sales volume growth of passenger vehicles in China during the early part of the year,” the company said.
Wednesday’s decline left Geely shares down 4.8 percent for the year. They more than tripled in 2017.