China – TeslaWeekly

The chairman of Zhejiang Geely Holding Group Co. has recently acquired a 9.7% stake in Daimler.

Geely Automotive Holding Ltd is a massive and growing automobile holding company.  Their main brand/company is Geely, where in China it’s experiencing massive growth and is a dominant player.

William Boston via MarketWatch:

Back in China, Geely Automotive has become the top domestic brand in the country. Instead of turning out cheap and undependable models, it began drawing Chinese customers away from some of the big Western brands that had set up shop in China.

More recently, Geely put its overseas ambitions into high gear. In May 2017, it agreed to buy a 51% stake in British sports-car brand Lotus and a 49.9% stake in struggling Malaysian car maker Proton Holdings Bhd. In December, Geely acquired 8.2% of Volvo AB, the Swedish truck maker.

Geely also was able to turn around Volvo after buying it from Ford (via MarketWatch):

After years of heavy investment from Geely, Volvo is now a thriving — if still small — high-end car maker. More recently, Volvo and Geely have pushed aggressively into electric-car development. Volvo promised last year to roll out electric or hybrid-electric engines in all its new models starting in 2019. Geely Holding in 2013 bought London Taxi, which makes electric-utility vehicles and taxis.

Here’s Geely’s growth in auto sales.  Last year it sold 1.2M cars, up over 100% from just two years ago (via carsalesbase):

Geely  (All Models)
2017 1.251.656 5,16%
2016 778.896 3,30%
2015 532.384 2,64%
2014 425.773 2,31%
2013 549.393 3,37%
2012 491.445 3,72%
2011 432.752 3,52%
2010 414.465 3,70%
2009 329.018 3,98%
2008 221.786 4,08%
2007 219.512 4,16%
2006 205.346 4,89%
2005 143.279 4,45%
2004 98.283 3,99%
2003 73.779 3,44%

As a result, Geely’s stock price has shot through the roof.  It’s up almost 10x in just 2 years.

Geely’s investment in Daimler is already concerning to the German government.

But if Daimler is unable to successfully take advantage of the transition to EVs, it will suffer.  And with a suffering Daimler, it can be a takeover target by a company like Geely if Geely continues to grow in value (currently Geely’s market cap is about $30B so they would need to grow substantially to be able to afford Daimler).

If Geely did take over Daimler, their game plan would be to leverage the Mercedes brand and push it to toward electrification.  And Daimler would probably have a good chance at it, under Geely’s leadership.

What does this all mean to Tesla and Tesla shareholders.  Well, it means that Tesla’s biggest competition might not be coming from the typical automakers that we all know about.  But it may be coming from China, as China’s huge market provides opportunities for China’s domestic auto companies to experience rapid growth and growing profits, which in turn they can use to buy premium auto brands.   The reason they’d like to buy premium auto brands is because a premium auto brand like Mercedes is extremely difficult to build from scratch.  It takes decades of reliability, safety and happy customers for people to trust your brand as a luxury brand.  But Geely is bullish on the future of cars, and with their investment and focus, I think they think there’s a lot of untapped potential with the Mercedes brand.