Original title: Geely Li Shufu holding hands behind Jia Yueting
After the scandal with FF, Geely’s stock price fell for four consecutive trading days.
Li Shufu, the outspoken head of Geely holdings, has repeatedly criticized the new forces of car making in public.
At the Wuzhen World Internet Conference in 2015, he once said that Internet car making is “soul without body”; at the Third International Automobile Safety Summit Forum in 2016, he also impolitely denounced “some enterprises” that car making is “intended to make money in the capital market”; during the Beijing auto show in 2018, he once again said that “Internet companies are fooling old people all day long “Common people”.
Two years later, Li Shufu’s attitude has obviously reversed.
On January 29, when the scandal with Faraday’s future was in full swing, Geely, who had not publicly responded, finally admitted their cooperative relationship.
Geely Holdings Group has recently signed a framework cooperation agreement with Faraday future. The two sides plan to cooperate in the fields of technical support and engineering services, and explore the possibility of OEM services provided by a joint venture between Geely and Foxconn. At the same time, as a financial investor, Geely Holding Group also participated in a small amount of investment in the listing of Faraday future spac.
In the eyes of the outside world, the cooperation between Jia Yueting and FF looks like a bold adventure. Although capital has shown great enthusiasm for new energy vehicles since last year, it will not easily pay for a company with high risk of failure.
It seems that the capital market is not optimistic about Geely’s operation. Since January 26, the share price of Geely Automobile (00175. HK) has declined for four consecutive trading days.
Li Shufu, who used to take advantage of the chain reaction of the subprime mortgage crisis in the United States and successfully acquired Volvo, chose to continue to expand when the auto industry ushered in the unprecedented great change.
In 2020, Geely acquired Lifan, which is on the verge of bankruptcy, and Hualing Xingma, a commercial car company with poor performance. On January 11 this year, Geely holdings announced the establishment of a smart car company with Baidu, which will start cooperation based on Geely’s latest world leading pure electric architecture sea vast intelligent evolution experience architecture. Two days later, on January 13, Geely holdings signed a strategic cooperation agreement with Foxconn and set up a joint venture to provide OEM and customized consulting services for global automobile and travel enterprises. On January 19, Geely and Tencent reached cooperation again, focusing on Intelligent cockpit, autopilot and digital fields.
All kinds of signs show the urgency of Geely’s transformation.
However, the expansion of the empire is always “bloodbath”, accompanied by high risks. Cash flow, high asset liability ratio, the pressure of transformation, and the pain of suppliers and channels are all problems that Geely in the process of expansion must face.
On December 1, 2020, Geely Holding Group adjusted its organizational structure, and Li Donghui was promoted to CEO of Zhejiang Geely Holding Group. After Li Donghui is promoted to CEO, he and an Conghui, President of Geely Holding Group, who is in charge of automobile production and sales, will report to Li Shufu, chairman of Geely Holding.
Li Donghui, previously the CFO of Geely Holding, has been a direct operator of Geely’s major mergers and acquisitions for a long time.
In recent years, Geely has taken frequent actions in the capital market, from the acquisition of proton automobile and its stake in Daimler to the promotion of the merger and reorganization of Geely Automobile and Volvo automobile last year and the plan to return to A-share and land on the science and technology innovation board. Behind a series of mergers and acquisitions and expansion, Li Donghui has contributed a lot.
Previously, Li Donghui said in an interview with the 21st century economic report reporter that although Geely has carried out many overseas mergers and acquisitions and frequently conducted investment and financing in the past two years, Geely is not blind. Every acquisition of Geely is not a simple repetition, but a thorough consideration based on its future strategy.
Every time Geely disclosed information about its investment and cooperation this year, it also claimed that it was to transform itself into a sustainable technology company.
Indeed, joining hands with Baidu and Tencent can improve their Internet and self driving genes to a certain extent. However, in the eyes of the outside world, the risk of investing in FF is extremely high.
“Geely wants to raise its valuation.” On January 28, some people in the automobile industry told the reporter of 21st century economic report.
Since last year, driven by Tesla and other companies, the valuation of new energy vehicle enterprises has been rising all the way.
Although Geely Automobile is China’s “independent brother”, it has been the champion of China’s brand passenger car sales for four consecutive years. However, at present, the market value of Geely Automobile is less than HK $300 billion, which is not only lower than BYD and great wall motor, which are also known as the “top three private automobile enterprises”, but also lower than Weilai automobile and Xiaopeng automobile.
Not long ago, Evergrande’s share price rose nearly 50% and its market value reached nearly 400 billion Hong Kong dollars due to new financing.
The concept of new energy vehicles seems to be becoming a major means for traditional automobile enterprises to raise their valuation. By taking a stake in FF, Geely seems to want to take advantage.
It is worth noting that in early January of this year, after the news of cooperation with Baidu came out, the share price of Geely Motor Co., Ltd. soared all the way to a historical high of HK $36.45 per share.
In fact, Geely Automobile has told a lot of stories in the capital market over the years, including shared travel projects such as Cao Cao’s car rental, high-end travel Yao’s joint venture with Daimler, and three-dimensional travel layout such as tailifei automobile. This time, Geely’s new story is about new cars and OEM.
However, since the news of cooperation with FF came out a few days ago, Geely’s share price has been falling continuously. As of press release, Geely’s share price was HK $28.95, with a market value of HK $284.25 billion.
Pain of new energy
On January 7, Geely motor (00175. HK) announced its sales volume in 2020. For the fourth consecutive year, Geely motor has won the champion of Chinese brand passenger car sales. In 2020, Geely Automobile (including linker brand) will achieve a total sales volume of 1.3202 million vehicles, a decrease of 3% compared with that in 2019, which is lower than the overall level of passenger car market.
However, Geely’s performance in the field of new energy vehicles is not good.
In 2020, the total sales volume of Geely’s new energy and electrified vehicles (including EV, HEV, mhev and PHEV) will be 68000, down nearly 40% compared with that in 2019. The pure electric brand launched in Singapore in 2019 did not achieve the expected market performance.
How to establish the position of leading enterprise of independent brand in the era of fuel vehicles in the field of new energy vehicles is an important issue for Geely, which is undergoing transformation.
In fact, in 2015, Geely launched the “blue Geely action” in a high profile, taking the lead in announcing the transformation to electrification among its own brands. In Geely’s new energy strategy, it takes into account three technical routes of hybrid, plug-in hybrid and pure electric vehicles, and develops hydrogen fuel cell vehicles and methanol vehicles. At that time, Geely’s goal was that by 2020, the sales volume of new energy vehicles would account for more than 90% of Geely’s overall sales volume; among them, the sales volume of plug-in hybrid and oil electric hybrid vehicles would account for 65%, and the sales volume of pure electric vehicles would account for 35%.
In the past five years, the pace of development of new energy vehicles is much slower than originally thought. In 2020, the sales volume of new energy vehicles will only account for 5.2%.
Of course, Geely is ambitious in the new energy vehicle market.
In addition to Geely’s geometry and Volvo’s pure electronic brand polestar, a new smart brand jointly owned by Geely and Daimler is also under preparation. Maple leaf, a low-end pure electric vehicle brand of Geely technology group, will also be launched in 2020. In addition, Geely brand, link brand, Volvo brand also launched different types of electric vehicles.
It can be said that Geely is the largest car company in the current electric vehicle brand and subdivision category. However, the reality is that Geely has failed to improve significantly in the new energy market.
It is worth noting that in September 2020, Geely Automobile Holdings Limited’s application for listing on the science and technology innovation board was accepted by the Shanghai Stock Exchange. At the same time, it disclosed its prospectus. In the prospectus, Geely Automobile mentioned that Geely Automobile’s three advantages of “new energy, energy saving and environmental protection, and high-end manufacturing” are closely related to the property of scientific innovation.
Geely said in its prospectus that it is in a leading position in the field of energy saving and new energy vehicles. In 2019, Geely has 14 models on sale, of which 13 are energy-saving and new energy models. The total sales volume of 1.6L and below fuel vehicles and electrified new energy (excluding the company’s joint venture brand link) was 933000 units, accounting for more than 70% of the company’s total sales volume.
At the same time, Geely continues to increase its R & D investment in energy-saving vehicles and related technologies. In 2019, Geely’s R & D investment totaled 5.451 billion yuan, of which nearly 5 billion yuan was invested in energy-saving car models and related forward-looking basic technologies, accounting for more than 90%, including about 2 billion yuan invested in energy-saving car model development, 2.2 billion yuan invested in energy-saving SUV / MPV model development, and basic technology research and development related to energy-saving power system and new energy (such as battery management system, battery protection device, etc.) About 800 million yuan.
To a certain extent, Geely’s energy-saving vehicles are mainly composed of low-end models with low emission standards. However, in the field of hybrid and new energy vehicles, there are not many advantages in the future development of energy-saving vehicles.
From the current market situation, the future development trend of Geely’s new energy vehicles remains to be further observed.
“New car 2.0”
Geely hopes to fight a beautiful turnaround in the field of electric vehicles.
At the Beijing auto show in September 2020, Geely released a new pure electric architecture sea “vast”. This is Geely’s “ultimate weapon” that took four years and invested 18 billion yuan to build. The vast architecture basically carries all the “wild hopes” of this large automobile enterprise in the field of pure electric intelligent vehicles in the future. According to the official information of Geely, it has not only made a complete and even radical plan on the hardware level, but also got rid of the hardware based design system of traditional automobile architecture.
In Geely’s business logic, the deep opening of the vast structure is feasible, that is, it is open to other car companies and brands.
In an interview with the 21st century business reporter during the Beijing auto show last year, an Conghui said that Haohan architecture has cooperated with more than seven brands and has launched research and development of more than 16 models. According to an Conghui, the seven brands also include those outside Geely Group. Geely is open in this respect.
In fact, in the era of electrification, it has become possible to share the architecture between automobile enterprises. Earlier, Ford announced that it would build a new pure electric vehicle based on Volkswagen’s MEB platform. Based on such cooperation, automobile enterprises can reduce the risk of R & D and share the cost, so as to maximize the benefits in the field of electrification.
Vast architecture also wants to be open. However, to a certain extent, the strength of Geely’s pure electric R & D system has not been well proved, and Geely has not launched a successful pure electric vehicle.
On the other hand, major domestic new energy vehicle companies are also developing their own electric platforms and architectures. For example, BYD’s e-platform, which is also ready to open to the outside world, has launched the online contract car making system for Didi.
To whom is the vast architecture open? Those who want to build a car but lack the experience and ability of vehicle manufacturing are most likely.
Geely’s first partner is Baidu. Baidu, which has been engaged in automatic driving for many years, wants to build a complete vehicle in person. With the blessing of Geely, it can quickly launch products based on Geely’s existing platform and making use of Geely’s car making experience.
In order to attract more partners, Geely announced to establish a joint venture with Foxconn to provide OEM services for auto companies and travel enterprises.
In fact, even if we cooperate with Foxconn, which has rich experience in automobile OEM, the joint venture may not be favored by vehicle enterprises. In the 100 year history of the automobile industry, due to the long industrial chain of the automobile industry, the pursuit of technology and the high control of quality, each of the tens of thousands of parts is very important, and the vast majority of automobile enterprises are in their own hands.
Subsequently, Geely announced its investment in FF and explored the possibility of providing OEM services by a joint venture between Geely and Foxconn.
From a logical point of view, Geely through a series of cooperation, to open up their own “OEM” business model. More “catfish” will be introduced to start the 2.0 era of new cars, and we hope to achieve greater economic benefits through opening our own architecture.
Of course, this business model is also a double-edged sword for Geely.
The first mock exam is based on the platform with sufficient market competitiveness and the competitiveness of products built on this platform. But after the opening of the framework, how to reflect the core competitiveness of Geely Automobile Brand? There is no doubt that these products based on the same architecture will be competitors of Geely Group’s new electric vehicles.
How does Geely avoid the distraction of becoming a “foundry” and reducing its own brand premium, which is the problem Geely needs to face.
After missing Weilai, where is the chance to hold hands?
At this moment, if you choose to invest in a new car making force, FF is definitely not the best option. In the face of ff91, which has been on the market for four years but has not yet been delivered on the market, both investors and consumers have gradually exhausted their patience.
As a matter of fact, as early as February last year, Geely had contact with Weilai automobile, and the reporter of 21st century economic report also learned from many sources that Geely did intend to invest in Weilai. According to the news at that time, Geely Automobile will invest US $300 million in Weilai automobile, and is expected to become the third largest shareholder of Weilai automobile.
At that time, the capital of Weilai was very tight, struggling on the edge of life and death. Li Bin, CEO of Weilai automobile, has been running around trying to find suitable investors for Weilai, including local government funds represented by Beijing Yizhuang Guotou, Huzhou Wuxing district and industrial funds represented by GAC. It is also reported that Geely, GAC, SAIC, great wall and other auto companies are bidding for Weilai.
From the perspective of Geely, it is reasonable to participate in investment. A person familiar with the matter told the 21st century economic report that although Li Shufu did not invest in Weilai before, he has always been very interested in its high-end platform. At the same time, with reference to Geely’s consistent efforts, investment in Weilai is theoretically possible.
However, there are many practical considerations for Geely to take a stake in Weilai, such as the extent to which Geely participates in Weilai investment, how the two sides work together, whether it involves changes in management, and so on.
There was no agreement on the cooperation. Later, the story is that the Hefei government entered the Bureau and Wei Lai turned over at one stroke.
After missing Weilai, Geely joined hands with FF, and Geely did not invest too much. In its official announcement on January 29, Geely specifically pointed out that it only participated in a small amount of investment in the listing of Faraday future spac. According to the news, the scale of investment is about 30 million US dollars.
This kind of capital scale only accounts for a small part of the equity in the new company, and the possibility of actually participating in and interfering in FF’s decision-making is not very high. Geely’s main purpose is to find new business opportunities through cooperation with FF, and FF needs Geely’s endorsement.
Moreover, FF plans to complete the listing in the second quarter. After the listing, Geely is not without the possibility of exiting.
From the perspective of FF, the entry of Zhuhai state-owned assets and Geely is the first step for the company to come back to life.
“I’m glad to see that Mr. Jia Yueting’s vision of transforming the automobile industry is about to come true. His rich experience in I.A.I system and user ecology construction will be combined with my experience in traditional automobile R & D and manufacturing and Entrepreneurship of electric vehicle enterprises. We are a real” super combination. ” On January 28, in FF’s press release, CEO Bi Fukang was quoted as saying.
In other words, in such a combination, Jia Yueting is responsible for the change and Bi Fukang is responsible for the products. Is Jia Yueting and Bi Fukang really a trustworthy super combination?
In order to build a car, Jia Yueting, who “suffocates for his dream”, once said that “even if he is doomed, he will not hesitate.”. In 2017, after the LETV crisis broke out, Jia Yueting left the United States in the name of “Lao Lai” and his promise of “returning home next week” has not been fulfilled. Although Jia Yueting successively brought sun Hongbin and Xu Jiayin, they all parted ways in the end.
Bi Fukang, who had worked in BMW for many years before, took the post of co-founder and CEO of new force of car making, Bayern motor, in 2017. However, at the Shanghai auto show in 2019, he suddenly left Bayern motor and appeared in another new force of car making, icornike. Half a year later, Bi Fukang moved to FF to replace Jia Yueting as CEO.
FF is Jia Yueting’s last “life-saving straw”, but the possibility of dream shining into reality is fading away.
According to the official statement of FF, there are 14000 orders for ff91 at present, and the sales volume is expected to exceed 400000 within five years. Ff91 will be mass produced in one year, the second model ff81 will be mass produced in 2023, and ff71 will be mass produced by the end of 2024.
However, FF, which has been pigeoned for several years, still has great doubts about whether it can successfully launch its products according to this planning rhythm. New car, capital, products, technology, marketing, brand and other elements are indispensable. Consumers will not easily pay for their dreams.
The transformation risk of automobile Empire
In the past few years, through radical expansion, Li Shufu has built a huge automobile empire.
So far, Geely Holding Group has owned more than ten auto brands, such as Geely, Volvo, link, luters, proton, geometry, remote commercial vehicle, London taxi, etc., which is one of the most famous auto companies in the world. Coupled with the recent cooperation with Baidu and taking a stake in FF, Geely’s business sector has become more complex.
The global automobile industry is undergoing a once-in-a-hundred-year great change, and the boundary of the automobile industry is constantly being overturned. Transformation is a difficult problem for all automobile enterprises. Under this premise, Geely chooses to further expand, unite vertically and horizontally, in order to try to realize the transformation to a technology-based enterprise.
In the industry, the advantages and disadvantages of multi brand strategy are obvious. The advantage is to be able to focus on different segments according to different brand positioning, so as to better develop the market; the disadvantage is that building a new brand requires resources, manpower and time. Although Geely can improve its efficiency through internal cooperation, it cannot concentrate its resources.
The expansion of Empires often hides greater risks.
On the one hand, with Geely’s merger and expansion, capital pressure and asset liability ratio have always been the focus of the industry. On the other hand, although Geely has made great progress in the Chinese market in the past years, it also faces problems such as supply chain risk and poor sales of new energy.
Geely is also trying to raise more funds as it returns to the science and technology innovation board. According to the prospectus, Geely Automobile plans to issue no more than 1.732 billion shares, accounting for no more than 15% of the total number of shares after the issue. The total investment of the project is 20.425 billion yuan, of which 20 billion yuan will be used.
The funds raised by Geely Auto will be mainly used for new model product R & D projects and supplementary working capital. The former plans to use 8 billion yuan of raised capital, while the latter plans to use 6 billion yuan of raised capital. Other projects, such as prospective technology R & D projects and product acquisition projects, plan to use 3 billion yuan of raised capital respectively.
At the beginning of 2021, Geely moves frequently, and the pace of transformation is greatly accelerated. However, it is still unknown whether Li Shufu’s automobile empire can move from China to the world.
(author: Zuo Maoxuan, editor: Zhang ruosi)