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Why Chinese Owner of Volvo Cars Is Betting Big on Volvo Trucks

 

Geely bought struggling black cab business London Taxi Company, saving it from collapse.


Despite Geely’s new involvement with AB Volvo, the truck company will remain separate from Volvo Cars, which split off from AB Volvo in 1999. (F) for $1.8 billion. Volvo Trucks is one of the world’s leading manufacturers of heavy trucks but it needs the assistance of a company better entrenched in the rapidly expanding Chinese market.

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Geely Holding bought Volvo Cars from Ford in 2010 and has been leveraging its ownership of the luxury carmaker to enforce its go-global strategy by marrying European styling and technology to Chinese production costs and manufacturing might. Other automakers in Geely’s portfolio include Malaysia’s Proton and British sports vehicle maker Lotus. The seller is Cevian Capital, Europe’s largest activist investor.

Geely will take over all the shares from Nomura and Barclays following necessary regulatory approvals. Geely will own an 8.2% stake in AB Volvo, or 15.6% based on voting rights.

“We will treat the new owners in the same way that we treat our other shareholders”, a spokesman for AB Volvo said.

AB Volvo also makes buses, construction equipment, diesel engines and industrial engines.

Li Shufu, chairman of Geely Holding, said he was delighted by the deal. “It is edging closer to becoming a global automaker with a complete line of vehicle businesses”.

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The automakers, including Volvo Car, are expected to collaborate in developing electric cars and self-driving vehicles. The brand’s stewardship of Volvo Cars was initially met with skepticism but has since seen Volvo emerge as a unique alternative to vehicles from Germany and Japan with increased profits to match.

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