Sweden's Volvo And China's Geely To Combine Forces?

Sweden's Volvo And China's Geely To Combine Forces?

about 4 years ago2 mins

On Monday, Swedish carmaker Volvo announced it’s in talks with China’s Geely Automobile to combine the two businesses into one all-powerful auto giant 💪

What does this mean?

Geely actually bought Volvo back in 2010, but the two continued to operate independently. Now, however, they want to merge into a single company, in hopes their combined size and expertise will help them better compete against other major carmakers. It’ll also give Volvo extra manufacturing capacity in China, as well as help Geely expand its own brands in Europe 🌍

If the move goes ahead, the combined company – whose shares will be listed on both the Swedish and Chinese stock exchanges – is expected to be worth around $30 billion. Not too shabby – especially considering Geely had to abandon its plan to take Volvo public in 2018 amid trade tensions and a downturn in the auto sector 🚘

Why should I care?

Dealmaking in the global auto industry has picked up significantly in the last year. Volkswagen and Ford, for example, have launched their own alliance, while Fiat Chrysler has agreed to combine with Peugeot-owner PSA Group. That trend is largely in response to the transformation of the industry, as the need for big investments in electric vehicles and self-driving technology continues to climb 🔌 Volvo knows what’s up: the carmaker’s announced it’ll only manufacture electric vehicles by 2040.

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Geely’s plan to expand in Europe might be a sensible strategy: data out on Monday showed Chinese inflation – the rate at which the prices of goods and services increase – soared to an eight-year high, as the deadly coronavirus outbreak causes anxious consumers to stock up on household goods, pushing up their prices. That, in turn, lowers consumers’ purchasing power and makes them less likely to fork out big sums for cars and the like.

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