Introducing Geely

In this article, we introduce Zhejiang Geely Holding Group, more commonly known as just Geely (吉利), one of China's largest private auto manufacturers which produces a range of affordable to premium cars under in-house as well as acquired Volvo and London EV Company (LEVC) marques. We also examine the financials for Geely Auto (吉利汽车)(HKEX: 0175), Geely Group's core constituent segment listed on the Hong Kong Stock Exchange (the remainder of Geely Group is private).


This article is part of our China auto industry series, which includes:

 

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Corporate History

Geely was originally founded in 1986 as a business producing fridge components. The company subsequently entered the motorcycle industry in 1994 and auto industry in 1997, with the launch of the first Geely car in 1998.


Geely exported its first car abroad in 2003 and went public on the Hong Kong Stock Exchange (HKEX: 0175) in 2005.


Note: as mentioned above, the entity that is listed on the Hong Kong Stock Exchange is what is now Geely Auto (吉利汽车), the main constituent of Geely Group, but not the entire Group is listed.


In 2006, Geely formed a joint venture with The London Taxi Company (now known as London EV Company Limited, abbreviated LEVC), to produce London taxis in China, before fully acquiring the business in 2013.


In 2008, Geely founded a separate in-house brand with compact electric vehicle and traditional combustion engine multi-purpose vehicle offerings named Gleagle (全球鹰).


In 2010, Geely acquired Volvo Cars from Ford, before launching a new, affordable in-house sedan brand named Dihao (帝豪) in 2011.


In 2014, Geely merged Gleagle, Dihao, and LEVC cars produced for use in China under the Geely marque.


In 2016, Geely founded a commercial vehicle brand named Farizon Auto (远程汽车), which predominantly focuses on light commercial vehicles, buses and coaches.


In 2017, Geely founded the LYNK & CO (领克) brand with Volvo Cars to produce modern, compact sedans and SUVs targeting a younger audience. The same year, Geely acquired a majority stake in British sports and racing car manufacturer Lotus Cars.


Over the past three years, Geely shifted its focus to the fast-growing electric vehicle market, with the launch of pure electric passenger vehicle brand Geometry (几何汽车) in 2019, premium electric vehicle brand Zeekr (极氪) in 2021, as well as electric pick-up truck and SUV brand Radar (雷达汽车) and battery-swapping passenger car brand Livan Auto (睿蓝汽车) in 2022.


In September 2022, Geely acquired a 7.6% stake in British luxury auto maker Aston Martin.


Brand Portfolio

Geely's current portfolio comprises of the following brand segments and constituent brands:

Geely Brand Portfolio
Geely Brand Portfolio

We walk through each of the following brand segments below.


Geely Auto Group

Geely Auto Group is Geely's core brand segment that produces in-house and joint venture brands Geely Auto (吉利汽车), LYNK & CO (领克), Geometry (几何汽车), Zeekr (极氪), and Livan Auto (睿蓝汽车), and also includes Geely's 49.9% holding of Malaysian auto company Proton Cars.


Geely Auto is Geely's main brand that produces a range of sedans, SUVs, multi-purpose vehicles, and electric vehicles in the affordable to middle-tier price range.


Geely Boyue L
Geely Boyue L (吉利博越 L) (Source: autohome.com/汽车之家)

Geely Dihao
Geely Dihao (吉利帝豪) (Source: autohome.com/汽车之家)

LYNK & CO is an auto brand founded jointly between Geely and Volvo that produces compact, modern sedans and SUVs targeting young professionals in the premium price range.


LYNK & CO 09
LYNK & CO 09 (Source: LYNK & CO)

Geometry is an electric vehicle brand launched in 2019 that produces pure electric sedans in the medium price range.


Geometry G6
Geometry G6 (Source: Geometry Auto)


ZEEKR is Geely's premium in-house electric vehicle brand, which currently comprises of the ZEEKR 001 (极氪 001) sedan launched in 2021 and the new ZEEKR 009 (极氪 009) multi-purpose vehicle unveiled this year.


ZEEKR 001
ZEEKR 001 (Source: autohome.com/汽车之家)

ZEEKR 009
ZEEKR 009 (Source: autohome.com/汽车之家)

Livan Auto is a new joint venture brand launched in 2022 between Geely and Lifan Technology (力帆科技集团) which focuses on producing mid-range priced sedans and SUVs with a battery swapping functionality (similarly to NIO).


Livan Maple Leaf 60S
Livan Maple Leaf 60S (睿蓝 枫叶60S) (Source: Livan Auto)

Proton Cars is a Malaysian auto company originally founded in 1985 by the Malaysian government which primarily sells in the domestic Malaysian market but also exported/still exports to other Asian countries and markets such as the United Kingdom and Australia. Geely acquired a 49.9% stake in Proton Cars in May 2017, with the goal of improving Proton's profitability and boosting the brand's sales in ASEAN and new markets.


Proton Cars
Proton Cars (Source: Proton)

Smart Automobile

Smart Automobile (智马达汽车) is a joint venture between Geely and Mercedes-Benz Group formed in 2020 which culminated in the launch of the smart #1 (smart精灵 #1) premium small SUV in 2022.



Smart #1
Smart #1 (Source: autohome.com/汽车之家)

Lotus Group

Lotus Group refers to British sports and racing car manufacturer Lotus Cars, which Geely acquired a majority stake in in 2017.


Volvo Car Group

Volvo Cars was acquired by Geely in 2010, and the segment includes both cars produced with the Volvo marque as well as Polestar (极星), originally a race car segment under Volvo which was transformed to become a standalone brand focusing on electric performance cars since 2017.


Polestar 3
Polestar 3 (Source: Sina Auto/新浪汽车)

Geely New Energy Commercial Vehicle

This segment refers to Geely's commercial vehicle brand Farizon Auto (远程汽车) founded in 2016. Farizon Auto focuses on producing new energy light commercial vehicles (e.g. smaller trucks and vans), buses and coaches.


Farizon Auto
Farizon Auto (Source: Geely CV)

LEVC

LEVC is the abbreviated name of London EV Company Limited, maker of the iconic London black cab fully acquired by Geely in 2013. Since 2017, LEVC has shifted its focus to developing electric commercial vehicles and providing zero-emission mobility solutions.


Radar New Energy Automobile

Radar Auto (雷达汽车) is Geely's newest brand founded in 2022, with intended product offerings including electric pick-up trucks and SUVs (as of the time of writing, Radar products are currently not yet on the market).


Radar Auto
Radar Auto Promotional Picture (Source: Geely)

Among all of Geely's many brands, the company's most popular car models are the Geely Boyue, the Geely Dihao, and the LYNC & CO 09, all of which have been featured above.


Other Businesses

In addition to the core automobile business, Geely also offers ride-hailing services in 62 Chinese cities with the company's new energy vehicles under the trade name Cao Cao Mobility (曹操出行), and also has a small-scale aerospace enterprise which focuses on low-orbit satellite development as part of Geely Technology Group.


Financial Overview

Next, we turn to look at Geely's financial performance and annual sales volume. Regrettably, since only Geely Auto (吉利汽车)(HKEX: 0175) is publicly listed, the financial data below only covers the core Geely brand, associates and joint ventures such as the LYNK & CO, ZEEKR, and Livan brands, and Geely Auto's vehicle exports to Proton Cars.


Revenue and Profit Margins


#1: Revenue Increased Rapidly From 2014 To 2018 But Stagnated Afterwards

Geely Auto's revenue grew rapidly from RMB21.7 billion in 2014 to RMB106.6 billion in 2018, but stagnated over the subsequent three years. Management argues that the company's 2021 performance was dampened due to the global semiconductor shortage.


Geely Auto Revenue and Income
Data Sources : Geely Auto Annual Reports (click image to enlarge)

Note: Geely Auto does not directly report an operating income metric. We compute operating income as gross profit minus operating expenses (i.e. administrative, distribution and selling expenses, share-based payments, and impairment losses on trade and other receivables) plus Geely Auto's share of profits from associates and joint ventures.



#2: Gross Profit Margin Declined Slightly In The Past Three Years, While Operating Profit Margin Wavered With Fluctuating Operating Expenses

Geely Auto's gross profit margin declined very slightly from the 18% to 20% range at the beginning of the past decade to the 16% to 17% range over the past three years, predominantly due to an increase in prices of raw input materials. In contrast, the company's operating profit margin fluctuated in the 3% to 13% range over the decade, with lower margins recorded during the past three years due to high selling, distribution, and research and development expenses.


Geely Auto Profit Margins
Data Sources : Geely Auto Annual Reports (click image to enlarge)

#3: Revenue is Predominantly Generated in China

Since 2015, more than 90% of Geely Auto's revenue is generated in China. The company's export sales declined during the middle of the decade, but rebounded over the past three years with international sales primarily in Eastern Europe, Malaysia, and the Middle East. It is noted that Malaysian sales refer to Geely Auto's exporting of vehicles to Proton Cars, with such sales accounting for 24% of Geely's total export revenue in 2021.


Geely Revenue Breakdown By Geographical Region
Data Sources : Geely Auto Annual Reports (click image to enlarge)


Vehicle Sales Data


#1: Geely Auto Sold 1,328,029 Cars In 2021 and 613,842 Cars In 1H2022

Geely Auto and the company's associates and joint ventures sold 1,328,029 cars in 2021 and 613,842 cars in the first half of 2022. Sales volume grew rapidly from 2014 to 2018 when many mature Chinese auto manufacturers recorded peak sales, but declined slightly and stagnated afterwards.


Geely Auto Sales Volume
Data Sources : Geely Auto Annual Reports (click image to enlarge)

In the first half of 2022, pure electric vehicles, plug-in hybrid vehicles, and hybrid electric vehicles accounted for 81,196 (13.2%), 23,891 (3.9%), and 9,103 (1.5%) of total sales volume respectively.


#2: Geely-Branded Cars Dominate Sales, While LYNK & CO Is Rising In Popularity

Geely provides a breakdown of cars sold each year comprising of the Geely, LYNK & CO (launched in 2017), Geometry (launched in 2019), ZEEKR (launched in 2021), and Livan (launched in 2022) marques. Geely-branded cars dominate sales in each year, which is unsurprising given that most of Geely Auto's car models are produced under the Geely marque. Nevertheless, LYNK & CO cars are also rising in popularity with increasing annual sales since the brand's launch in 2017.


Of the 613,842 cars sold during the first half of 2022, 54,481 (8.9%) were Geometry cars, 77,258 (12.3%) were LYNK & CO cars, 19,010 (3.1%) were ZEEKR cars, and 17,292 (2.8%) were Livan cars.


Geely Auto Sales Volume Breakdown By Brand
Data Sources : Geely Auto Annual Reports (click image to enlarge)

Note: Geely only provides data for the number of Geometry cars sold in 2019 and in 1H2022. Geometry cars are aggregated under the Geely marque for reporting purposes in 2020 and 2021.


Future

We conclude with some of management's key strategies for Geely Group's future.


#1: Upgrading Product Mix

Management will continue promoting Geely's premium, higher-margin brands such as LYNK & CO and ZEEKR to increase the company's profit margins and gain a larger market share in the higher end auto market. Given the competitive nature of China's auto industry and the continuously rising costs of raw materials, we don't think management's goals will be easy to accomplish.


#2: A Shift Towards Smart Automobiles

Geely launched its Smart Geely 2025 strategy at the end of 2021 to become a "technology-led global automotive group" by developing smart vehicle products based on the Group's newly created Leishen (雷神) powertrain platform and building over 5,000 battery-swapping stations across 100 cities to expand the company's power network. From our view, this strategy is not only an attempt to capture a share of China's emerging smart electric vehicle market, but also a method for Geely to upgrade the company's product mix since smart electric vehicles typically justify a higher premium.


#3: International Expansion

Management plans to grow established foreign markets in Eastern Europe, the Middle East, Southeast Asia, South America, and Africa, as well as tap into other EU and Asia Pacific markets using Geely's new energy vehicles.



Using the strategies discussed above, Geely aims to reach an annual sales volume of 3.65 million units by 2025, of which 600,000 (16.4%) would comprise of overseas sales. For reference, 87,628 cars (14.3% of total sales volume) were exported in the first half of 2022, while no export volume is provided in previous years.

 

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