Volvo Cars will become the first major foreign carmaker to own its assets in China fully.
You may have heard that Volvo Cars are going public soon and will be listed on the Stockholm stock exchange. Before this happens, the company has decided to take full control over its entire operations in China.
To this effect, Volvo Cars have signed an agreement with parent company Geely Holding to acquire their stake in Volvo Cars’ China operations.
This would make Volvo Cars the first major non-Chinese car brand to have full control over their Chinese operations. The major components that make up Volvo Cars’ operation in China are:
- Its manufacturing facilities in Chengdu and Daqing
- Its national sales company
- Its R&D facility in Shanghai
This transaction is pending regulatory approvals and will be formally completed only in 2023, with the first step coming in 2022 when the joint venture requirement for auto manufacturing in China will be lifted.
Here’s the press release with more.
PRESS RELEASE
Volvo Cars has signed an agreement with its parent Geely Holding to acquire Geely Holding’s stake in the companies’ joint ventures in China, with the aim of taking full ownership of its car manufacturing plants and sales operations in the country.
The acquisition of an additional 50 per cent of the shares in Daqing Volvo Car Manufacturing Co., Ltd and Shanghai Volvo Car Research and Development Co., Ltd, will further strengthen Volvo Cars’ position in China, its largest market, and maximize exposure to one of the fastest growing regions globally.
Although the two joint venture companies are already fully included in Volvo Car Group’s financial statements, Volvo Cars’ share of their net income and equity will increase following the transaction.
“With this agreement, Volvo Cars will become the first major non-Chinese automaker with full control over its Chinese operations,” said Håkan Samuelsson, chief executive of Volvo Cars.
“Geely Holding Group and Volvo Cars are continuously evaluating the best way to collaborate and structure operations within the wider Group. These two transactions will create a clearer ownership structure within both Volvo Cars and Geely Holding,” said Geely Holding chief executive officer, Daniel Donghui Li.
Volvo Cars has grown significantly faster than the average market in China in recent years and will continue to invest in the country to maintain the strong growth trend. Following the transactions, Volvo Cars will have full ownership of its manufacturing plants in Chengdu and Daqing, its national sales company in China and its R&D facility in Shanghai.
The transactions will be completed in two steps, starting in 2022 when the joint venture requirement for auto manufacturing in China will be lifted, and expected to be formally completed in 2023.
The transactions are pending regulatory approvals. Employees and partners within the relevant companies will not be directly affected by the transactions. Financial details will not be disclosed.
Volvo Cars has seen strong growth in the Chinese market in recent years. In 2020, it sold 166,617 cars in China, an increase of 7.5 per cent versus 2019 and its eighth consecutive sales record in the market. In the first half of 2021, sales increased 44.9 per cent compared to the same period in 2020, and by 40.1 per cent compared with the same period in 2019.
