Geely’s purchase of Volvo deemed “one of the most successful mergers in the auto industry in decades” – paultan.org

Volvo Cars recently announced that it intends to launch an initial public offering (IPO) and to list its class B shares on Nasdaq Stockholm. A Volvo IPO has been mooted for quite a while now, and if it comes to fruition, it will enable global institutional and retail investors to participate in the next phase of the company’s value creation.

Referring to a report by Global Times, an IPO could value Volvo at USD25 billion, which is significantly more than what it was worth in 2010 when Ford sold the Swedish automaker to Zhejiang Geely Holding Group (Geely) for only USD1.8 billion.

The encouraging valuation estimate is an indicator of Volvo’s successful turnaround plan under Geely, which has seen a slew of new models being introduced to the market as well as increasing sales and revenue figures.

“This is one of the most successful mergers in the auto industry across the world within the recent 10 to 20 years, and there’s no doubt Geely is a good investor,” said Feng Shiming, an analyst with Menutor Consulting.

In the first half of 2021, Volvo’s retails sales stood at 380,757 units, which was 41% higher compared to the pandemic-affected period in 2020. Meanwhile, revenue increased by 26.3% to 141 billion Swedish krona and operating income returned to the green at SEK13 billion. The latter is a major bounce back of 1,438% after the pandemic pummelled Volvo’s operating income to a loss of SEK989 million in the first half of 2020.

More recently, the company announced its sales performance for the first nine months of 2021, where it sold 530,649 cars, which represents a 17.6% increase compared to the same Covid-hit period in 2020. No financial figures were provided to go along with the 3H 2021 results, but the company says it will keep its outlook for the rest of 2021, although the ongoing semiconductor chip shortage will be an issue for it and many other automakers.

According to Feng, Geely has not only invested strongly – more than USD11 billion – into the then struggling Swedish automaker after acquiring it, but also “fed it back” with technologies so that it could rapidly distinguish itself from other competitors and take a firm foothold in the competitive automotive market.

He added that money raised from the IPO will help Volvo as it continues its electric vehicle offensive, which will see it become a fully electric car company by 2030. “The future of the car industry lies in each individual automaker’s performance in the new energy sector,” Feng ended.

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