The proposed merger of Zhejiang Geely Holding Group Co. and its Swedish subsidiary, the Volvo Group (or Volvo AB), announced Monday will create China's first global car maker while opening the doors wider to financial resources and technological advantages.
The merger talks are ongoing. Volvo and Geely will establish a joint working group to prepare a proposal for their respective boards.
The automotive giant that will spring from the merger could be worth as much as $30 billion, putting it level with the Ford Motor Company, which has a market cap of $32 billion on Wall Street as of Monday. Sources in Geely cited by media said a new company structure might be in place by the end of 2020.
Geely bought Volvo in 2010. It sold over 2.15 million cars and trucks in 2018, making it one of the most important Chinese motor vehicle makers.
Analysts said the merger will allow both giants to combine scale, resources, and knowledge as the global automotive industry transitions towards electric vehicles (EVs). For example, Porsche in September 2018 said it will cease production of its diesel-powered cars by 2025. Volkswagen in December 2018 said it will stop making gasoline-powered cars entirely in 2026.
In April 2019, Geely launched its first global all-electric vehicle brand -- Geometry -- and unveiled its first vehicle -- Geometry A -- a high-end sedan. Geometry plans to launch 10 pure EV models in multiple segments such as sedans, SUVs, crossovers, and MPVs by 2025. Geometry will also be included in the merger.
As one automotive group, the Volvo, Polestar, Geely and Lynk & Co. brands will remain separate and distinct, according to a joint statement by both firms. In October, Volvo said it will merge its engine development and manufacturing facilities with those of Geely. The merger will establish a new unit to supply Lotus, LEVC, Lynk, and Proton (and potential rivals) with next-generation combustion and hybrid engines.
The combined company intends to list on the Stockholm Stock Exchange (operating under the name Nasdaq Stockholm), as well as the Stock Exchange of Hong Kong Ltd. The listings, however, will depend on the approval of terms and conditions by the two companies' boards and shareholders.
"A combination of the two companies would result in a strong global group," said Li Shufu, chairman of Geely Holding Group. "We look forward to working with Håkan Samuelsson, president, and CEO of Volvo Cars, to further investigate this opportunity with the goal to strengthen the synergies within the Group while maintaining the competitive advantage and the integrity of each individual brand."
Volvo AB employs 41,500 full-time workers and is based in Gothenburg, Sweden. It has automotive production plants in Gothenburg; Ghent, Belgium; South Carolina; Chengdu and Daqing, China; and engine plants in Skövde, Sweden; and Zhangjiakou; China.
