Volvo buys out Geely’s stake in Chinese joint ventures

Volvo Cars has reached an agreement with its parent Geely Holding to buy the latter’s stake in their joint ventures operating in China. The move comes in anticipation of next year’s scrapping of the Chinese requirement for foreign carmakers to carry out manufacturing with a local joint venture partner. Tthe transaction could also be linked with plans for a Volvo IPO.

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Pending regulatory approvals, Volvo will acquire Geely’s 50% stake in Daqing Volvo Car Manufacturing and Shanghai Volvo Car Research and Development, allowing it to strengthen its position on the important Chinese market. The sale is expected to be concluded by 2023.

From next year onwards, foreign carmakers will no longer be required to set up joint ventures with a local partner to manufacture cars in China. The rule, which has already been lifted for EV makers, will allow foreign carmakers to take full control of their Chinese production facilities.

IPO

At the start of the year, intentions to merge Geely Automobile and Volvo Cars were scrapped. Meanwhile, rumours have emerged of plans for an IPO and stock market listing for Volvo. Taking full control of its Chinese joint ventures could help create a clearer company structure, making it easier for investors to fully understand what they would be investing in.

In June, Volvo CEO Håkan Samuelsson told Reuters his company was making progress towards a possible IPO later in 2021, adding components and platforms would still be shared with Geely but they would do so “at arm’s length”, consistent with how independent companies do business.

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