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Management
Geely: The ever-evolving businessÂ
Li Shufu, CEO and founder of Chinese carmaker Geely, overcame a host of setbacks to become the billionaire owner of a multi-faceted business.
The founder of Geely, a leading player in the global automotive industry, started the business in 1986 with a view to capitalizing on the opportunities offered by China’s rapid growth during this period. Â
Li Shufu started out as a photographer in the early 1980s, but a failure to win state approval forced him to close his business. He then dabbled in electronic waste recycling, manufacturing refrigerator parts and magnesium-aluminum decorative panels used in construction.Â
Eventually, Li saw a great opportunity in producing mopeds as an affordable mode of private transport. He began to research the design and manufacturing aspects, founding his fifth business, Geely, in 1994, the first company in mainland China to produce mopeds and later motorcycles. The brand took off, sparking a decade of strong demand. However, while Geely was able to ride the wave of this demand, its competitors soon caught up. Geely’s eventual exit from this market was down to “disorderly… and even unfair competition, such as tax evasion.” Li, however, was far from done.Â
From two wheels to fourÂ
By 1997 foreign car manufacturers had started to enter China. However, private entrepreneurs could not garner state support to build cars and, according to journalists at the time, the authorities actively discouraged such activities. Li was undeterred, believing strongly that China – including Geely – could produce its own cars without the need to partner with foreign manufacturers. To avoid problems with the government, Li approached a local partner in Deyang, Sichuan, which had already established a car factory as part of its operations. With a 7% capital injection, he was able to obtain the necessary license and, together with two Geely engineers, began to study automotive technology. This tiny team built its first car by hand.Â
Li’s goals for Geely were to produce affordable cars and create a presence in the industry. Believing that a suitably trained and qualified workforce was the key to automotive success, in 2000 Li set up the Beijing Geely University, alongside technical schools to ensure a supply of qualified employees. Despite these efforts, however, Geely continued to suffer from a lack of governmental support.Â
The turning point came in 2001 when China joined the World Trade Organization (WTO), a relationship that promised to open up the country’s industries to the global market. China included Geely as the first private automotive manufacturer on the list it submitted to the WTO, enabling it to sell its cars nationally. In 2002, the company released the Ziyoujian (“Free Cruiser”) four-door sub-compact sedan, designed by South Korea’s Daewoo Motors.
Geely continued to develop its business, building up its understanding of customers’ demand. In 2005 the company was the first privately owned Chinese auto manufacturer to be invited to the Frankfurt Auto Show. That year, the company was also listed on the Hong Kong Stock Exchange. As Geely developed its expertise in manufacturing, it pivoted from producing cheap cars to focusing on advanced technologies, high standards of manufacturing and service, and market leadership. Â
Growing through acquisitionÂ
By 2005 vehicle sales had reached 143,279, representing growth of 46% on the previous year. In 2006 Geely began to follow an international expansion strategy through partnerships and acquisitions. Its first partnership was with Manganese Bronze, London’s iconic black cab producer, which allowed Geely to produce the models in its Shanghai factory. In 2010 Geely rescued Manganese Bronze from administration for ÂŁ11m ($13.7m). Â
Li had ambitious plans for the London Taxi Company (also known as Geely UK): between 2010 and 2017, Geely invested more than ÂŁ325m in the brand, opening a new factory in Coventry, UK in 2017. By 2018 it was producing 10 times the number of vehicles it had previously. It also expanded sales beyond the UK to international markets as far-flung as Australia and Azerbaijan.Â
The company continued on a path of strong growth, generating net profit of $173m in FY 2009, a year-on-year rise of 35%. Li made headlines in 2010 when he tapped into these margins to buy Swedish car company Volvo from Ford for $1.8bn, amid strong competition from other buyers, including Ford executives. Â
From cars to EVs and mobility solutions Â
By 2015, less than 20 years since its foundation, Geely had become a leading global automotive company. Through its own development and acquisitions, it gained access to Western technologies that would enable it to learn quickly and improve its own capabilities. Â
Having mastered the combustion engine, on 18 November 2015 the company announced its ambitious new-energy initiative, Blue Geely. This involved moving the product portfolio to new-energy models including pure electric vehicles (EVs), hybrid electric, and plug-in hybrid vehicles. The overall aim was to become the market leader in China. Within that, Blue Geely had five targets to hit:Â
- To meet and exceed the Chinese government’s fuel directives to bring average fuel consumption to 5 liters per 100 km by 2020. Â
- To sell plug-in hybrid vehicles at a similar price level to that of its traditional combustion engine range.Â
- To have new energy models account for 90% of sales by 2020.Â
- To conduct research into hydrogen fuel cells and metal fuel cells.Â
- To become a market leader in new energy, lightweight material technologies, and intelligent and connected systems.Â
Geely created its China Europe Vehicle Technology Center (CEVT) in Gothenburg, Sweden, where it began developing its Compact Modular Architecture to support new products such as plug-in hybrids. It also started to create lightweight vehicles and EVs at the London Taxi Company. This range of new products and services cemented Geely’s position at the cutting edge of mobility.Â
To facilitate the transition to EVs, Geely also built a strong digital backbone. This involved creating CAOCAO Mobility, a high-end rental and car hailing app, as well as ECARX, a smart mobility technology provider. Between 2017 and 2021, ECARX launched a range of technologies under the brand iNTEC. This included GKUI, the Geely Smart Ecosystem that enabled drivers to connect to the in-car cockpit and mobile phone through apps. By 2020, the number of GKUI users exceeded two million.Â
Geely’s acquisitions and JVs from 2012 to 2021Â
Between 2012 and 2021, Geely made several acquisitions and embarked upon a number of joint ventures. This included taking a stake in Malaysia’s Proton Holdings and the UK’s Lotus, as well as Germany’s Daimler and France’s Renault. Â
As well as the partnership and JV with domestic internet company Baidu, in 2018 Geely established a JV with the world’s largest producer of EV batteries, Contemporary Amperex Technology (CATL), to research and develop battery cells. Barely six months later, Geely announced that Shanghai Maple Guorun, an indirect (99%-owned) subsidiary of Geely Automobile Holdings, would enter into a JV with South Korea’s LG Chem, another manufacturer of EV batteries. The JV would be 50:50 and would help Blue Geely to achieve its initiative to ensure a further supply of core battery components.Â
Li described the acquisitions as “by no means a physical integration of assets but, rather, a collaboration to move the brands forward.” Â
Geely’s shrewd investments in leading global brands not only gave the company credibility but also access and ties to the global automotive industry, transforming its domestic strategy into an international one. This global access allowed Geely to better identify and build strategic capabilities. Going international has also allowed the company to become even stronger in the Chinese market.Â
A man with visionÂ
In 2010 an executive from a major Chinese auto company described Li as:Â Â
“A man with vision. He is someone that shouldn’t be underestimated… I think he has a big chance to make it, because he has the Chinese government and, most of all, the huge China market behind him.”Â
Li had come a long way from photography to become the billionaire owner of a group operating in eight segments and sectors: passenger cars, commercial vehicles, technology, motorsports and motorsports tourism (motorsports parks), mobility, finance, digital technologies, and education. The Geely Auto Group alone employed more than 50,000 people across 12 plants and five global R&D centers (Hangzhou, Ningbo, Gothenburg, Coventry, and Frankfurt) and a further 1,000 in its design studios in Shanghai, Gothenburg, Barcelona, California, and Coventry. In 2020, the auto brands sold over 1.43m vehicles, making Geely Auto the bestselling Chinese brand for the fourth consecutive year.Â
Li focused on putting in place the technology and supply chain to achieve his goals for Blue Geely, announcing two new Blue Geely initiatives: a new EV company to create intelligent battery EVs (BEVs); and a company dedicated to developing energy-saving and NEVs, hybrid EVs (HEVs), plug-in hybrids (PHEVs), range-extended EVs (REEVs), and energy-saving low-emission vehicles. Â
Li was not content to focus solely on land-based vehicles; Geely had also made two further investments in future mobility solutions. In 2017 it bought Massachusetts-based flying-car company Terrafugia, which had created a two-seater airplane with folding wings to drive on the road. In 2019, the company made a $55m investment in Germany’s Volocopter, with the goal of launching an urban air-taxi service in China. Â
Li commented at the time: “Geely is transitioning from being an automotive manufacturer to a mobility technology group.”Â
Key takeawaysÂ
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