Volvo, Geely To Merge: What Does It Mean For The Global Automakers?

In an effort to build upon its financial and technological strengths, Volvo Cars AB and Geely Automobile Holdings Limited (0175.HK) are considering combining their businesses into one global car company.

The newly created company could be worth as much as $30 billion, putting it in line with the value of Ford, Bloomberg reported. A spokesman told the news outlet, the new company structure could be in place by the end of 2020.

Volvo, which was bought by Geely in 2010, employs about 41,500 full-time workers with headquarters in Gothenburg, Sweden. The company has automotive production plants in Gothenburg; Ghent, Belgium; South Carolina; Chengdu and Daqing, China; and engine plants in Skövde, Sweden; and Zhangjiakou; China.

The company has reportedly doubled sales under the ownership of Geely, with rapid growth seen in China. Together, the new company would have combined annual shipments that would reportedly exceed 2 million units, according to date from 2019 (via Bloomberg).

The move would allow the two companies to combine scale, resources, and knowledge as the automotive industry undergoes a transformation towards electric vehicles. As one automotive group, the Volvo, Geely, Lynk & Co., and Polestar brands would remain separate and distinct, the companies said.

The newly combined company would have intentions of listing on the Stockholm exchange as well as in Hong Kong stock with the venture is dependent on the approval of terms and conditions of the two companies’ boards and shareholders.

Volvo delayed plans to list its IPO in 2018, citing trade tensions at the time. At the time that it looked to list on the exchange, Volvo was targeting a market value of $16 to $32 billion, with investors only willing to pay $12 billion to $18 billion, sources told the news outlet at the time. Geely has a market value of about $16 billion in Hong Kong.

“A combination of the two companies would result in a strong global group,” Li Shufu, chairman of Geely Holding Group, said in a statement. “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.

Shares of Geely stock were up 1.48% as of 1:55 p.m. EST on Monday.