The mutual owner of Volvo Car AB and Geely Automobile Holdings Limited, Li Shufu, is considering combining the two brands into a single company. The resulting company, which would combine Volvo with China’s best-selling car brand, would be worth roughly $30 billion dollars—on par with Ford Motors.
David Leggett, an analyst with GlobalData, says the merger would continue a trend in the auto industry of merging and acquisition activity. “The combination would bring the opportunity to have greater scale economies in areas such as parts procurement and accelerate technology sharing across the Volvo, Geely, Lynk & Co. and Polestar brands,” he said in an email.
According to Leggett, the impulse to combine companies comes from what auto companies see as considerable future business challenges, including automation and electrification. Volvo has stated it wants electric cars to make up half of global sales by 2025 and to be “a climate-neutral company” by 2040.
A combined Volvo-Geely company would also have more reach in the global financial market. In a statement, Volvo said the company would have access to the global capital market through Hong Kong, “with the intention to subsequently list in Stockholm as well.” That, Leggett says, could “bring more capital for investment in costly advanced technologies.”
Shufu, in a statement, said that the two companies together would “result in a strong global group.” Geely Holding Group will form a joint working group to prepare a proposal to the boards of both companies. Any combination between the companies would have to be acceptable to the boards and shareholders of each, as well as the rules of the Hong Kong stock exchange.
