Will Volvo be sold in the next decade? | Geely-Volvo 'Split'

“Its purpose in acquiring Volvo has already been achieved; Ford will inevitably sell Volvo, albeit reluctantly.” Over a decade ago, when journalists asked Li Shufu why he believed the acquisition of Volvo could succeed, Li Shufu responded thus. Indeed, behind every commercial move lies the driving force of interest. Whether to acquire or divest hinges not only on sentiment but also—more significantly—on commercial interests and value considerations. Especially amid today’s industry turbulence, mergers and splits occur constantly: Volkswagen and Ford have formed an alliance; Mercedes-Benz and BMW have joined hands for long-term collaboration on autonomous driving technology development; and FCA and PSA completed their ‘lightning marriage.’ Yet even as consolidation proceeds, fragmentation continues apace: the Renault-Nissan Alliance fractured following Carlos Ghosn’s arrest, while Tata Group—under competitive pressure—is planning to seek partners for Jaguar Land Rover. For Li Shufu, having tasted the benefits of integration, he has consistently championed consolidation. Recall his signed article published in foreign media in 2018 upon Geely’s acquisition of Daimler shares: “Automakers must cooperate—or risk being swallowed up: ‘The automotive industry must explore new pathways for collaboration and innovation; virtually no company can go it alone.’ Thus, in February this year, Geely and Volvo announced plans to establish a new automotive group, continuing coordination in finance, procurement, and R&D—and accessing global capital markets via a listed entity. Meanwhile, Geely still needs to learn from Volvo: at the end of last year, Geely planned to restructure its powertrain business jointly with Volvo; and in April, foreign media reported that Volvo might be exploring joint internal-combustion engine development with Daimler to reduce costs—Geely is actively brokering both initiatives and stands to become the greatest beneficiary of these technological collaborations and synergies. For Geely, continuously facilitating such partnerships serves as a springboard and shortcut to entering the mainstream of the global auto industry. Such examples abound—not only within the automotive sector but beyond. Consider Daimler’s merger with Chrysler: Chrysler sought entry into Europe, while Daimler aimed to expand its U.S. market share. Both possessed vast, non-overlapping sales networks—in Europe and North America respectively—whose integration concealed enormous commercial potential. At the time, Daimler focused on passenger cars, whereas Chrysler specialized in SUVs, minivans, and light trucks; substantial opportunities for shared technical platforms also existed. Indeed, the Geely-Volvo dynamic parallels the Daimler-Chrysler case: Volvo possesses technological and R&D capabilities but needs capital and access to the Chinese market; Geely, leveraging capital-market mechanisms and China’s massive market opportunity, can bolster its brand strength through Volvo’s technology—and simultaneously accelerate globalization by drawing on Volvo’s global operational expertise. Each party gains what it needs. The vision is compelling—but the Daimler-Chrysler story did not unfold as anticipated. Burdened by costs, Chrysler posted consecutive annual losses, overwhelming Daimler and ultimately forcing a split—Daimler eventually divested Chrysler. This precedent applies equally to Ford: in the late 1990s, Ford acquired both Volvo and Jaguar Land Rover, only to reluctantly divest them during crisis, slimming down to survive.

Geely’s ‘Financial Acumen’ | Geely-Volvo ‘Split’

At the time, Daimler’s filings disclosed numerous details—for instance, Li Shufu, Chairman of Geely Holding Group, acquired Daimler shares via the secondary market through Tenaclou3, an overseas corporate vehicle under Geely Group Co., Ltd.—a newly established business unit of Zhejiang Geely Holding Group Co., Ltd. (‘Geely Group’). Geely Group is owned (91% stake) by Li Shufu and managed by Zhejiang Geely Holding Group Co., Ltd.; positioned as a new-business platform, it encompasses Caocao Mobility, Terrafugia flying cars, Qianjiang Motorcycles, and Homma, among others—later consolidated into Geely Technology Group. This arrangement underscores Li Shufu’s direct involvement—and thereby highlights its strategic significance. So where did the acquisition funding originate? According to foreign media reports and industry insiders’ analysis, Geely employed a sophisticated financial instrument known as a ‘funded equity collar’ to raise capital and acquire its Daimler stake—making Geely the largest single shareholder. In essence, an equity collar involves pledging the acquired shares to a bank in exchange for corresponding investment funds—a kind of reverse operation. Geely Group enlisted Bank of America Merrill Lynch and Morgan Stanley, which earned approximately $250 million in upfront fees. This funded equity collar instrument has likewise attracted interest from other aggressive acquirers—including SoftBank and HNA Group. Yet the equity collar is a highly complex financial tool—a hybrid product combining stock derivatives with securities-backed loans. Though risks remained within Geely’s controllable range, unprecedented events like this year’s COVID-19 pandemic render outcomes uncertain. Indeed, given Daimler’s recent share price, Geely’s paper loss now exceeds $5 billion. Why, then, was Geely so resolute in investing in Daimler? As Li Shufu stated: “Going it alone makes winning this war nearly impossible. The global automotive industry faces immense innovation opportunities in the 21st century—but also mounting challenges from non-automotive companies. No automaker can prevail solo. To proactively seize opportunities, we must refresh our mindset, collaborate with friends and partners, and dominate technological frontiers through synergy and sharing. Our investment in Daimler stems precisely from this strategic thinking.” Bill Russo, Founder and CEO of Automobility Ltd., commented at the time: “Li Shufu’s acquisition of Daimler shares reflects exceptionally clear strategic rationale and industrial logic. The joint mobility venture will mark the first step in their strategic partnership—and serves as compelling proof of this foresight.” Former Daimler CEO Dieter Zetsche likewise offered a telling phrase: “very promising so far.” Li Shufu believes only two or three traditional automakers will survive globally in the future—and whoever dominates the technological frontier will emerge victorious. In his view, Daimler stands as a global automotive leader—pioneering in electrification, intelligence, autonomous driving, and shared mobility. From a strategic-synergy perspective, Daimler can generate powerful synergies with Geely and Volvo. Perhaps this is precisely why Li Shufu accepted the risk to invest in Daimler.

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