Eyeing IPO, Volvo Cars to take full control of Chinese business

Volvo Cars has struck a deal to buy out parent company Zhejiang Geely Holding from their joint ventures in China, in a move that could make a potential initial public offering (IPO) for the Swedish automaker more attractive to investors.

Hangzhou-based Geely, which also owns a 9.7 per cent stake in Daimler, said earlier this year it was considering options for Volvo, including an IPO and stock market listing. In February, Geely’s Hong Kong-listed unit Geely Automobile and Volvo Cars scrapped plans to merge.

“These two transactions will create a clearer ownership structure within both Volvo Cars and Geely Holding,” Geely’s CEO Daniel Li said in a statement, which did not refer to the possible IPO.

Analysts expect other foreign automakers to strike similar deals in China, the world’s biggest car market, when the country’s requirement for auto manufacturing to be carried out with a local joint venture partner is lifted next year.

Such rules for electric carmakers have already been lifted, allowing Tesla Inc to already make and sell vehicles via fully-owned operations in China. Volkswagen has gained control of an electric car unit in the eastern city of Hefei.

Volvo Cars’ deal, financial terms for which were not disclosed, will give it full ownership of its manufacturing plants in Chengdu and Daqing, its Chinese sales company and its research and development facility in Shanghai.

Volvo Cars sold over 166,000 vehicles in China last year, and its dealers are offering heavy discounts to compete with other premium brands like BMW and Audi.

The Gothenburg-based company was bought by Geely from Ford in the aftermath of the global financial crisis more than a decade ago, and has since shared ownership of its Chinese plants with its parent.

Volvo Cars said the transactions, which are subject to regulatory approval, would be carried out in two steps, starting in 2022 and seen formally completed in 2023.

Volvo Cars CEO Hakan Samuelsson said in June the company was making progress towards a possible IPO later in 2021, and that while it would continue to share platforms and components with Geely, they would do so at “an arm’s length distance,” consistent with the way independent companies do business.

Sweden’s Volvo Car Group has bought additional shares in electric car maker Polestar last week, taking its holdings in the electric vehicle (EV) maker controlled by Volvo’s parent company, the Chinese automaker Geely, to 49.5 per cent. The investment comes after Polestar raised $550 million in its first external funding round in April.

“The move reflects Volvo Cars’ strong conviction in Polestar’s positioning and exciting potential in the high growth segment for premium electric vehicles,” Volvo said in a statement.

Shares in Tesla are down 9 per cent this year amid concerns of increased competition from traditional car makers in the production of electric vehicles.

The purchase sees Volvo’s stake returning to the level it previously had, before the April funding round, when Polestar received a cash injection from Chinese investors Chongqing Chengxing Equity Investment Fund Partnership and Zibo. Polestar builds hybrid performance cars in the western Chinese city of Chengdu and a sedan model at its Taizhou plant in the east. It also has a new model in development called Precept, a larger, more environmentally friendly sedan which it displayed at last year’s China auto show.

Volvo said it had no further plans to increase its stake in Polestar beyond the 49.5 per cent it now owns.

Swedish automaker Volvo Cars said it is considering listing on the Nasdaq Stockholm stock exchange this year. Swedish steelmaker SSAB said it had agreed with Volvo Cars to jointly explore the development of fossil-free steel for use in the automotive industry.

Volvo Cars will lay out its future technology roadmap today during the Volvo Cars Tech Moment, an online technology event that illustrates how it will transition towards becoming a fully electric premium car company and a world leader in the fast-growing premium electric segment by 2030.

During the live event from Gothenburg, Sweden, the company will give audiences a first glimpse of the technologies that underpin Volvo Cars’ future, in which all next generation cars will be purely electric. Representatives from Google, Luminar, Northvolt and NVIDIA will also join and contribute at the event.

The Volvo Cars Tech Moment will include an array of keynotes and interactive Q&A sessions that will provide exciting new details in areas such as the company’s path to full electrification, its ambition to take software development increasingly in-house, its centralization of computing, its plans for the next level of safety technology and the plan for introduction of safe autonomous driving.