With an aim to take full ownership of its car manufacturing plants and sales operations in China, Volvo Cars has signed an agreement with its parent, Geely Holding, to acquire Geely Holding’s stake in the companies’ joint ventures in the country.
According to the company, the transactions will be completed in two steps, starting in 2022, when the joint venture requirement for auto manufacturing in China will be lifted and expected to be formally completed in 2023.
The transactions are pending regulatory approvals. However, the financial details will not be disclosed, the company said in a statement.
Employees and partners within the relevant companies will not be directly affected by the transactions, the company stated.
The acquisition of an additional 50% of the shares in Daqing Volvo Car Manufacturing Co., and Shanghai Volvo Car Research and Development Co., will further strengthen Volvo Cars’ position in the country, which is its largest market. Besides, it will also maximise exposure to one of the fastest-growing regions globally.
Volvo Cars has been seeing robust growth in China in recent years. In 2020, it sold 166,617 cars in the country, witnessing an increase of 7.5% over the previous year. It also registered a sales record for eighth consecutive years. In H1 CY21, the company recorded 44.9% growth against the same period last year and 40.1% compared with the same period in 2019.
Following the transactions, Volvo Cars will have full ownership of its manufacturing plants in Chengdu and Daqing, its national sales company in China and its R&D facility in Shanghai.
Even though the two joint-venture companies are already fully included in the financial statements of Volvo Cars Group, the net income and equity will increase following the transaction.
Håkan Samuelsson, Chief Executive, Volvo Cars, said, “With this agreement, Volvo Cars will become the first major non-Chinese automaker with full control over its Chinese operations.”
Daniel Donghui Li, CEO, Geely Holding, said Geely Holding Group and Volvo Cars are appraising different ways to collaborate and structure operations within the wider group. As a result, these two transactions will create a more explicit ownership structure within both Volvo Cars and Geely Holding.