Volvo to take control of China operations from parent Geely
Volvo Cars has agreed to take control of its China ventures from parent Geely Automobile Holdings Ltd., potentially boosting its valuation ahead of a planned share sale.
The deal will make Volvo the first major foreign automaker to gain full control over its Chinese operations, the Swedish company’s Chief Executive Officer Hakan Samuelsson said in a statement Wednesday. The companies declined to comment on terms of the deal.
Next year, China is set to remove the 50% cap on foreign automakers’ investments in joint ventures that make gasoline-powered cars, after lifting the limit for electric-vehicle manufacturers in 2018. Tesla Inc. was the first non-Chinese carmaker to set up a wholly owned venture in the world’s biggest car market.
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Under the agreement, Volvo will buy an additional 50% of shares in Daqing Volvo Car Manufacturing Co. and Shanghai Volvo Car Research and Development Co. The transaction will be completed in two steps, starting in 2022 when the joint-venture cap is lifted, and is expected to be formally completed in 2023.
In an interview with Bloomberg News last month, Geely Chief Executive Officer Daniel Li said he expects Volvo’s planned listing on the Nasdaq Stockholm stock exchange to “move quite fast." It should lure a “very good valuation," given it’s the only auto joint venture in China that allows the foreign partner to control decision-making on the ground, Li said.
Volvo, which Hangzhou-based Geely took control of in 2010, could be valued around $20 billion in the IPO, Bloomberg News reported in March.
German automakers BMW AG and Volkswagen AG have moved already to acquire bigger stakes in their joint ventures after the state government announced plans to lift share limits.
In 2018, BMW said it would pay 3.6 billion euros to own 75% of its venture with Brilliance China Automotive Holding Ltd. in 2022. Last year, VW raised its holding in its venture with Anhui Jianghuai Automobile Group to 75%. Daimler AG also has discussed boosting ownership of its venture with BAIC Motor Corp., people familiar with the matter have said.