Geely buys Volvo for $1.8b

• Source: Global Times
• [03:22 March 29 2010]
• Comments

China overtook the United States last year as the world's No. 1 auto market, with 13 million cars sold, compared with 10 million in the US.

Professor Zhou Qing, of the Department of Automotive Engineering at Tsinghua University, said Chinese auto manufacturers could learn very quickly by making such buyouts and that takeovers would be more fruitful and productive once professionals work together for communication and the transfer of expertise and know-how.

"Carmakers are able to gain access to more advanced technology through the purchase of intellectual property rights. The auto industry, however, is not all about reading blueprints and producing cars. It is rather largely dependent on the engineers' expertise and experience," Zhou said.

Zeng Zhiling, an auto industry analyst with Shanghai-based Global Insight, said that the deal cannot be duplicated because few targeted companies can have Volvo's image and its prominent performance in Europe and the US.

"Geely will focus on Volvo's development in China and its wise decision to run Geely and Volvo separately at any given time. It is probable that Geely will march onto the Chinese official car list with the Volvo S80L, which is now being produced locally by Chang'an," Zeng said.

Component sourcing from China will help Volvo lower its operating costs and improve its profits, said Zeng, adding Volvo will buy components from China step by step.

"Without platform technologies, the Volvo brand will be an empty shell. Geely is not capable of producing Volvo vehicles without those technologies," Zeng said.

Yang Ziyun, a branding expert with the State-Owned Assets Supervision and Administration Commission, said Geely's takeover of Volvo is the first step toward the international branding of the Chinese auto industry.

"Despite the risks, we should be firm on the go-global strategy, and stick to the belief that China, the world's largest automobile market, will provide large room for development," Yang said.

The sale is expected to close in the third quarter of 2010.

Qiu Wei, Kang Juan and agencies contributed to this story