Automobile Industry: The Case of Geely Motors Liesl Martin & Royce Kuzwayo

Contents CHINESE AUTOMOBILE INDUSTRY GEELY AUTOMOBILE HOLDINGS LTD VOLVO ACQUISITION COMPETITORS, SUPPLIERS, CUSTOMERS KEY SUCCESS FACTORS CONCLUSION

Production of 13.8 mill units 2009 China exceeded Japan as leading car producer in 2009 Less than 5 out of 1000 people own a car Growth potential Growth peak in 2015 Projected sales growth at 1mill vehicles annually Shanghai, Tianjin, Gaungzhou 3 Main car manufacturing cities Chinese Automobile Industry

Automobile Production Statistics Source: OICA

World Economic Outlook: Shift in Global Output  Structure of the world economy is undergoing a tectonic shift. Source: World Bank, 2010.

Political Economy Issues: Growth Competitiveness Ranking  Losing competitiveness due to structural and political factors and the strength of the currency

Contents CHINESE AUTOMOBILE INDUSTRY GEELY AUTOMOBILE HOLDINGS LTD VOLVO ACQUISITION COMPETITORS, SUPPLIERS, CUSTOMERS KEY SUCCESS FACTORS CONCLUSION

Geely Automobile Holdings Ltd Hong Kong investment holding company, operations Hong Kong & China Manufactures automobiles and automobile components through subsidiaries 12,282 Employees Research, Production, Marketing & Sales Brands: Free Cruiser, Geely Kingkong, Vision, Geely Panda Produce under five key brand groups: Geely, Maple, Gleagle, Emgrand & Englon 6 Assembly manufacturing plants in China Revenues Dec ‘09 CNY14,069.2 mill ($2,062.7 mill)  3 times 2008 Operating profit CNY1,252 mill ($183.6 mill) 2009  8 times 2008 Net profit CNY1,182.7 million ($173.4 mill) 2009  34.5% increase 8 (Datamonitor, 2010)

Contents CHINESE AUTOMOBILE INDUSTRY GEELY AUTOMOBILE HOLDINGS LTD VOLVO ACQUISITION COMPETITORS, SUPPLIERS, CUSTOMERS KEY SUCCESS FACTORS CONCLUSION

Volvo Acquisition Biggest overseas acquisition by a Chinese automaker 100% ownership of Volvo and related assets, including agreements on intellectual property rights, supply and R&D arrangements Planned production Volvo’s annually Double original Volvo production capacity Mainstream European brand vs domestic economy car brand Building a successful partnership between Volvo and Geely will require a solid plan for post-acquisition integration

Geely / Volvo Life-Cycle

Competitive Strategy

Contents CHINESE AUTOMOBILE INDUSTRY GEELY AUTOMOBILE HOLDINGS LTD VOLVO ACQUISITION COMPETITORS, SUPPLIERS, CUSTOMERS KEY SUCCESS FACTORS CONCLUSION

Geely Competitors & Suppliers 14 Main: China Motor Corporation Dragon Hill Wuling Automobile Holdings Limited Brilliance China Automotive Holdings Limited Main: China Motor Corporation Dragon Hill Wuling Automobile Holdings Limited Brilliance China Automotive Holdings Limited Zhejiang Geely Automobile Parts & Components Company Limited Shanghai Maple Engine Company Limited IAC Group (Interiors) Autoliv Inc (Airbags) Zhejiang Geely Automobile Parts & Components Company Limited Shanghai Maple Engine Company Limited IAC Group (Interiors) Autoliv Inc (Airbags) CompetitorsSuppliers (Datamonitor, 2010) (Geely Annual Report, 2009)

Geely Customers 15 Customer base is diversified and fragmented All customer transactions below 10% of the Group’s revenue 2009 sales from the largest and 5th largest customers respectively between 8% & 2% Distributor networks: 45 countries  5 continents  500 retail distributors  600 service stations  300 dealers Beijing 2010: Geely Alternative Power Insect Vehicle (Datamonitor, 2010)

Contents CHINESE AUTOMOBILE INDUSTRY GEELY AUTOMOBILE HOLDINGS LTD VOLVO ACQUISITION COMPETITORS, SUPPLIERS, CUSTOMERS KEY SUCCESS FACTORS CONCLUSION

Key Success Factors Good relationships with Government Expansion strategy Adaptability Gap analysis  Similarities  Differences  Geely was the only automobile company in 2009 awarded “The State Technology Achievement Class 2 Award” by Government for achievements in technological innovations (Geely Annual Report, 2009)

Contents CHINESE AUTOMOBILE INDUSTRY GEELY AUTOMOBILE HOLDINGS LTD VOLVO ACQUISITION COMPETITORS, SUPPLIERS, CUSTOMERS KEY SUCCESS FACTORS CONCLUSION

GDP: History of low growth volatility, (Standard Deviation)

Conclusion The initial “Strategic Transformation”, new technologies and product launches strengthens the Group’s competitiveness positioning the company for further expansion. Important that they stay focused on their core business and not expand too fast too soon.

Thank You Questions?

References Geely Annual Report Geely Automobile Holdings Limited. Geely holdings limited AE0A-B587-4C04-8C BA1B6944&N= AE0A-B587-4C04-8C BA1B6944&N= OICA PingQing, L., HuaJie, S & Qiang, G The Global Value Chain And China Automotive Industry Upgrading Strategy. Management Science and Engineering. 2(1), Qin, F. & Huchen, X The Management Strategy in GEELY Automobile Marching towards International Standard. College of Business and Administration Zhejiang University of Technology, P. R. China