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Bloomberg Businessweek (April 8, 2024)

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Год выпуска: April 8, 2024

Автор: Bloomberg Businessweek

Жанр: Бизнес

Издательство: «Bloomberg Businessweek»

Формат: PDF (журнал на английском языке)

Качество: OCR

Количество страниц: 64

How Geely Lost Its Crown to EV Leader BYD

China’s rapid embrace of electric cars left the automaker, with stakes in Volvo, Lotus and other manufacturers, scrambling for second place

Few outside of China had heard of any of the country’s domestic carmakers until Geely broke through in the 2010s. Domestically, cars from Zhejiang Geely Holding Group Co. were among the nation’s bestselling. And globally, the empire of Geely and its billionaire founder, Li Shufu, spanned stakes in Sweden’s Volvo, Germany’s Mercedes-Benz and Malaysia’s Proton, as well as a partnership with France’s Renault. Geely is best known for the acquisition of Volvo Cars in 2010 and its remarkable turnaround. This success showed for the first time that a Chinese manufacturer could run an international brand as well as its European or American peers.

But by 2023 the automaker was eclipsed by BYD Co., the upstart that zoomed past Geely to become the world’s largest seller of electrified vehicles—and the largest car brand in China. BYD wasn’t even among the 10 biggest producers by shipments in the country as recently as 2021, when state-owned manufacturers’ joint ventures with Volkswagen AG and General Motors Co. topped the list, followed by Geely, data from the China Passenger Car Association showed. Then the country’s embrace of EVs changed everything.

Geely is now racing to catch up to BYD in battery-powered vehicles and to maintain its lead in exports beyond China. Whether it can succeed is far from certain. But its story can be a lesson for other legacy automakers trying to adapt to a world moving toward zero-emissions cars.

“BYD is performing very well. We should learn from them, but I think we’re not all that bad,” Gui Shengyue, chief executive officer of Geely Automobile Holdings Ltd., said at a media briefing in March. “We have the confidence in becoming China’s No. 1 domestic brand again, but naturally this will take time.”

Geely is introducing more EVs. It’s also investing in connected car technologies, auto semiconductors and satellites. It’s spent more than 200 billion yuan ($27.7 billion) on research and development in the past 10 years, Li Donghui, chief executive officer of the holding group, said at the same event.

The ascent of BYD, which started as a battery maker, came after years of research in EV and plug-in hybrid technology. For most of the past 10 years, its R&D spending exceeded profits. In 2019 it posted 1.6 billion yuan in net income but invested more than 8 billion in R&D, founder Wang Chuanfu said at an event in 2023. Government support played a part in sustaining BYD through its early years, but China’s national EV subsidies were phased out in 2022.

BYD has been working on its flagship DM-i hybrids platform for almost 20 years. The fourth generation of the technology—which allows a vehicle to run on electric batteries until they’re depleted, at which point a gasoline engine kicks in, helping to overcome anxiety over driving range— became a smash hit after its introduction in 2021.

Several years ago, Geely and others in the industry had focused on an architecture called P2, or position 2, which adds an electric motor to convert a conventional combustion drivetrain into a plug-in hybrid without changing the engine or transmission, says Yale Zhang, managing director of the consulting company Automotive Foresight in Shanghai. This addition was an easy way for legacy manufacturers to modify their existing lineups, but the range on battery power is short, usually around 51 kilometers, and there’s no change in the fuel efficiency of the engine. BYD’s DM-i platform has a more sophisticated drivetrain: It incorporates two electric motors and saves on fuel.

“When BYD’s DM-i plug-in hybrid came out a few years ago, it blew the competition using the P2 platform out of the water,” Zhang says. The latest plug-in hybrids from BYD and Geely, which has stopped making vehicles with the P2 architecture, offer versions that can go 100km before the gas engine kicks in, and they improve fuel efficiency when it does.

Geely Auto in 2015 set a goal of having electrified vehicles make up 90% of its sales by 2020, but it failed: Only 5.2% of its 2020 sales were EVs and plug-in hybrids. (The goal counts plug-in hybrids and EVs, battery-containing vehicles which in China are together referred to as new energy vehicles.) The share of Geely’s overall sales that were EVs and plug-in hybrids rose past 20% for the first time in 2022 and was close to 30% last year, when it delivered 487,000 battery-powered vehicles. This number was 980,000 vehicles in 2023 for the wider group, which includes international brands such as Volvo. BYD sold 3 million EVs and hybrids in 2023, after it stopped making conventional gasoline cars the previous year.

Geely has a new plug-in hybrid platform called Leishen Power, which took more than five years and tens of billions of yuan to develop. The latest version hit the market in 2023 and is found in Geely’s new Galaxy series of affordable EVs and plug-in hybrids, and the Lynk&Co brand.

The Leishen platform has multiple transmissions added to improve the driving experience compared with that of BYD’s DM-i, which uses a single transmission.

Geely has also introduced Zeekr, a luxury pure electric brand with cars that start at 200,000 yuan. The marque grew 65% to sell more than 118,000 vehicles in 2023. The Zeekr 001 aims to compete against Tesla’s popular Model Y, with good handling and features such as massage seats and voice command assistance. The unit applied for its own initial public offering in the US at the end of 2023.

EVs have also become a bigger focus in Geely’s international portfolio. Its Swedish-origin Polestar brand sells EVs, and Lotus Cars in England has introduced luxury electric vehicles such as the Electre SUV and Emeya hypercar. The Smart marque that sells electric minicars by MercedesBenz AG entered into a joint venture with Geely in 2019 and has expanded to offer a battery-powered sport utility vehicle in China, Europe and Asia.

A lot of Geely’s growth has come through a combination of acquisitions of foreign brands and the introduction of newer nameplates in the Chinese market. As a result, it’s created a portfolio of brands that have a fair amount of overlap, which seems more complicated to manage, says Tu Le, managing director of consultants Sino Auto Insights.

“On top of that, Geely seemed to miss out on the investment frenzy that took the EV sector by storm about five to six years ago, which leaves them with a portfolio of newish brands that need significant investment but [have] little capital to feed them,”

Le says. “To catch up, Geely should dump internal combustion engine cars in China as soon as possible, reconcile its portfolio of brands and continue to invest in R&D, and launch new products to keep up with and outlast the other players.”

Geely management doesn’t consider its broad portfolio to be a problem. Li Donghui said in a media briefing in January that Geely aims to be the Volkswagen of the EV era—referring to the German auto group whose brands range from VW and Seat to Porsche and Bentley.

As both Geely and BYD aggressively target expansion in global markets, Geely may have an advantage because of the foreign brands it owns, Le says. Some of them are made in China, but not all. Volvo, for instance, has facilities in Sweden, China and the US. Last year, Geely exported 408,000 vehicles from China, according to the China Association for Automobile Manufacturers, compared with BYD’s 243,000. BYD has said it wants to double exports to 500,000 in 2024.

Meanwhile, parts of Geely’s empire are faltering. Polestar is getting rid of about 10% of its workers, or about 450, to cut costs as growth in deliveries slows. The brand delivered 54,600 EVs in 2023, slightly short of the company’s target of 60,000. And Lotus Technology, which went public in the US via a SPAC listing on the Nasdaq in February, has seen its share price fall by 50% since its debut.

With EVs a growth driver, especially in exports, Geely needs to get the EV market in China right first, says Automotive Foresight’s Zhang. “Geely should develop the sales of its EVs in China,” he says. “Then it can take these popular models that have been tested in China to take on the international market.”

Geely Auto briefly pulled ahead of BYD in monthly sales in January of this year, thanks in part to the popularity of its plug-in hybrid models, whose sales surged to almost 30,000 in January, compared with only 588 in the same period last year. But as BYD continues to stoke an EV price war in China by discounting many of its models, it overtook Geely again starting in February and shipped 302,459 vehicles in March, compared to Geely’s 150,835.

“With more cars using the Leishen platform coming out in 2024, Geely is ready to arm-wrestle with BYD,” Zhang says. “While it’s difficult to return to the top spot again given that BYD is still on a roll, it’s possible to maintain a close second.” — Linda Lew

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