Twelve years ago, Volvo became a ward of Chinese carmaker Geely. It was a terrible time for the Swedish automotive brand, and a triumphant one for Geely, the first Chinese carmaker to buy an established Western automaker.
Volvo was desperate at the time because an equally desperate Ford Motor had spent the previous decade driving the Swedish auto brand right into the ditch, after paying $6.5 billion for the privilege in 1999. By 2010, Ford was scrambling for cash in a global recession. Along came Geely with $1.5 billion and the deal was done (all figures in U.S. dollars). Yes, Ford sold Volvo at a massive loss.
Volvo in 2010 was a total mess. Sales the previous year came in at a paltry 334,000, or roughly half what Ford had hoped for at that point. Volvo was bleeding cash, having just lost $653 million the previous year. Volvo’s unions opposed the Geely deal, on the grounds that jobs would surely be exported to China. Fear and panic rippled through the hidebound auto industry, one fearful of a full-on takeover by China, which was emerging as the world’s biggest car market.
Geely, though, promised to keep Volvo distinct from its other brands. And held true to that. Then Volvo and Geely together went to work re-fashioning Volvo into what it is today: an aspiring EV (electric vehicle) powerhouse bent on rivalling the likes of Tesla and others.
Investors liked the deal so much, that in late October last year Volvo Car AB had its initial public offering (IPO) debut. That raised about $2.3 billion for Volvo/Geely and valued the new Volvo at about $17 billion, according to Bloomberg. Geely had made more than a tenfold return on its initial investment, though that does not account for the billions and billions Geely plowed into this venture developing products, technologies, marketing plans and factory capabilities.
There’s more. Late last month, EV maker Polestar, a joint venture of Volvo and Geely, went public on the Nasdaq exchange, raising $850 million in fresh capital to fund its three-year product plan that the company hopes will make it profitable.
Polestar says it has secured a $3 billion deal to sell 65,000 cars to Hertz, the formerly bankrupt car rental company. And Polestar also says it has received 32,000 orders for the Polestar 2. Despite the challenges now facing EV makers, Polestar hopes to sell 295,000 vehicles a year by 2025. That’s 10 times the amount it sold in 2021.
None of this would be possible without Eric Li. Volvo’s successful turnaround and promised electric future were made possible by Geely’s billionaire founder, who also controls Lotus and through his holding company has a 10% stake in Mercedes-Benz. Li remains ambitious, and not just for Volvo and the rest of his Geely empire.
Last month, rumours were circulating that Li and another Chinese investor, Baic, were aiming to take on more of MBGn.DE (Mercedes-Benz) to create a minority stake large enough to control corporate decision-making. All was denied, though who knows that the future holds for ambitious business-types?
In any case, as Bloomberg and others have noted, Li chose to foot the hefty bill to overhaul Volvo’s lineup and, in doing so, let Volvo operate as something close to an independent brand. So, where are we now with the Volvo story?
In two weeks (July 20), we’ll get the latest glimpse into the Volvo turnaround, when Q2 financial result are published. Volvo, like other car brands and companies, has been dealing with supply chain issues, ongoing COVID lockdowns in Asia and the Russian attack on Ukraine. Revenue in Q1 was up and profitability remains, though sales slumped 20%. More of the same is expected in Q2.
Volvo’s commitment to electrification remains strong, however. Volvo Canada, for instance, recently announced that all its 2023 vehicles will be electrified in some way or another – mild hybrid, hybrid or full electric. Globally, Volvo plans to have only fully electric vehicles by 2030 and be carbon neutral by 2040.
I’ve been testing a selection of the new Volvos over the past few weeks and some of them remain gas-only conventional rides. Nice, but not overly impressive. I am, though, particularly excited to get behind the wheel of the C40 Recharge crossover, which starts at just under $60,000 and promises a slick, all-electric urban driving experience that sets the standard among EVs. A Tesla Model Y kind of competitor.
We’ll see about that, and report our findings.