Geely Automobile and its sister firm Volvo are planning to merge and list in Hong Kong and Stockholm, giving Volvo access to public markets after it failed to list its stock two years ago.
Monday’s shift to merge the two units come as global auto manufacturers pursue alliances to respond higher to the cost of switching to EVs, tougher emission guidelines, and autonomous driving.
Shares in Geely soared up to 11.5% to HK$15.28 Tuesday.
Zhejiang Geely, Geely Automobile’s parent, purchased Volvo Cars from Ford Motor in 2010.
Along with electric premium brand Polestar and Geely’s new energy model Geometry, the new firm will have five brands, with products starting from affordable sedans to luxurious sports cars, underlining the emergence of China’s first international car manufacturer, analysts stated.
It remains vague how much valuation can be included to Geely, a Hong Kong-listed, $16 billion firm, by adding Volvo assets. Geely’s sales began to climb from 2015 as its products started utilizing Volvo technology.
Geely Automobile sold 1.36 million vehicles last year and intends to sell 1.4 million automobiles in 2020. Volvo sold over 700,000 cars in 2019.
Volvo and its parent organization had been discussing an IPO to value the car manufacturer at between $16 billion and $30 billion before they dropped the listing plans two years ago.
In comparison with Volvo’s IPO plan, this offer may better align Geely and Volvo’s interests, Shi Ji, an analyst at Haitong International, mentioned in a note.
Volvo and Geely will create a combined working organization to draft a proposal for their respective boards, the businesses announced Monday.