Geely’s Volvo bid highlights China’s global car ambition

EIJING — Chinese carmaker Geely’s move to buy Volvo shows that manufacturers in the world’s biggest auto market are revving up their global ambitions with high-end Western technology, analysts say.

US auto giant Ford and Geely, one of China’s largest private carmakers, announced Wednesday they had agreed on the main terms of the sale of the Swedish brand, with a final agreement expected to be signed in early 2010.

Analysts said the Chinese firm would boost its image through acquiring Volvo, a byword for quality and reliability, and the know-how gained would speed up Geely’s breakthrough into foreign markets.

“Geely is keen to get the so-called ‘invisible assets’ from the deal — that is, brand recognition and new technology,” said Fu Zhiyong, an auto analyst for Beijing-based Adfaith Management Consulting Inc.

Xia Ping, a Shanghai-based analyst for investment bank Core Pacific-Yamuguchi, agreed.

“New technology and products in its product line should be a driver of its overall growth,” he told AFP.

“It’s a strategy for many in the industry. Geely just stepped out ahead of the others,” Xia added.

China is now the largest car market in the world, surpassing the United States earlier this year as the economic crisis hit US sales. A massive Chinese government stimulus package has helped boost domestic consumption.

Automakers in the world’s third-largest economy have sought to seize the moment to push into foreign markets, snapping up bits of top-end car units that their troubled Western owners are all too willing to sell off.

Chinese heavy machinery maker Tengzhong in October reached a deal with General Motors — still pending regulatory approval — to buy the luxury Hummer brand.

Beijing Automotive Industry Holding Co. (BAIC) this month announced it had paid 200 million dollars for the intellectual property rights for some assets of GM’s Swedish unit Saab.

“Acquisition of foreign brands is one of the ways to develop global competitiveness,” said Mei Songlin, general manager of research at J.D. Power Asia-Pacific in Shanghai.

“Chinese automakers including Geely, BAIC and SAIC (Shanghai Automotive Industry Corp.) have looked for acquisitions to help them advance the pace of development,” he said.

“This is different from the strategy adopted by most Japanese and Korean automakers, who tend to rely on organic growth.”

Some Chinese car firms such as BYD and Chery have also opted to invest in their own research and development, but experts said the path adopted by Geely could be a quicker route to worldwide success.

The Volvo acquisition, if consummated, would “shorten the time needed to upgrade its brand and improve global presence”, Fu said.

Mei agreed, saying Geely had made “significant progress in recent years” with the sales of its homegrown Free Cruiser and Vision models, but could take a quantum leap forward using Volvo ingenuity.

“The acquisition of Volvo is of great significance for Geely. It certainly is a welcome sign as the company endeavours to achieve its sales target of 50 percent in international markets,” Mei said.

Fu dismissed any fears that the Swedish brand would be sullied via its acquisition by a Chinese firm.

“Volvo will still be Volvo, the acclaimed best-quality car in the world,” he said. “The quality of cars will not be tainted as Geely are fully aware of its strength.”

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