Geely merges auto brands under a new roadmap to navigate a fierce market

Two high-profile brands within the same company are on a collision course to compete for buyers in a highly competitive market. Should you continue to let them go at it head-to-head or devise a strategy where each distinctly plays to its own strengths?

Chinese auto giant Geely Holding Group chose the latter in a decisive readjustment of its corporate structure.

On November 14, Geely Holding announced the transfer of a 20 percent stake in Lynk & Co to Zeekr for 3.6 billion yuan (US$490 million). Both are auto brands under the Geely group.

At the same time, Volvo, another Geely subsidiary, sold a 30 percent stake in Lynk & Co to Zeekr for 5.4 billion yuan.

What's more, Zeekr injected an additional 367 million yuan into Lynk & Co's registered capital. The move values Lynk & Co at 18 billion yuan post-merger, and gives Zeekr a 51 percent controlling stake.

According to Geely, although the Lynk & Co brand will remain following the merger, its operations will be fully integrated with Zeekr, starting with finance and procurement, and extending to product development.

This merger signals a pivotal strategic adjustment for the Geely Group, as it looks to future-proof its development amid increasingly stiff competition in China's passenger car market.

Shedding fat

Lynk & Co and Zeekr started as sister brands under the Geely umbrella. Launched in 2016, Lynk & Co was a joint effort between Geely and Sweden's Volvo, with a focus on building internal-combustion engine vehicles.

Zeekr, for its part, was originally the electric-vehicle division of Lynk & Co. Spun off in 2021 as an independent unit, it went public on the New York Stock Exchange on May 10 this year.

Though the two brands targeted different propulsion systems – internal combustion for Lynk & Co and electric for Zeekr – they have much in common. Both now rely on the same Sustainable Experience Architecture, a modular electric-vehicle platform developed by Zeekr Technology Europe with an investment of 18 billion yuan over four years. Besides, their designs were similar, with Zeekr's 001, a shooting brake bearing striking resemblance to Lynk & Co's lineup.

In recent years, Lynk & Co and Zeekr have been Geely's poster boys in the passenger car market. Lynk & Co sold 169,800 units in the first three quarters of this year, while Zeekr's sales neared 150,000. These two brands account for nearly 30 percent of Geely's total sales volume.

However, Geely's leadership increasingly realized that overlap between Lynk & Co and Zeekr's product lines led more to wasted resources and internal competition than better customer coverage. Hence the motivation to initiate this merger.

Cannibalization hurts

Technically, Lynk & Co and Zeekr did not directly compete initially because of the distinct difference between combustion and electric vehicles.

However, the domestic automotive landscape has changed significantly in recent years. Traditional car brands are increasingly moving toward hybrid and fully electric vehicles, creating new dynamics in the market.

Lynk & Co followed a gradual path to electrification, starting with plug-in hybrids. Between January and October 2024, Lynk & Co sold over 220,000 vehicles, a year-on-year increase of nearly 38 percent. Its bestsellers were the Lynk & Co 08 EM-P and 07 EM-P hybrid models.

Yet, in September, when Lynk & Co launched its first fully electric sedan, the Z10, the reception was underwhelming. Despite a competitive price range of 180,800 yuan to 313,800 yuan, sales remained sluggish, with fewer than 5,000 units sold within the first two months of its introduction.

The Z10 faced tough competition within the Geely family. Zeekr had similar models – the 007 sedan and the 001 shooting brake – both based on the same platform.

Deliveries of Zeekr's 007 totaled more than 10,000 units in the same period. Meanwhile, the Zeekr 001, a direct competitor to Z10, previously achieved a monthly sales peak of 14,300 units, establishing itself as a flagship for Geely's electric-vehicle lineup.

The challenges for Lynk & Co stemmed not only from the broader market but also from its internal competition with Zeekr. The tension was exacerbated when Zeekr hinted at plans earlier this year to develop hybrid and range-extended models, encroaching on Lynk & Co's core turf.

Under the restructuring, Geely plans to differentiate the two brands more clearly.

According to Chinese media reports, Zeekr will focus on mid-to-large vehicles – mid-size cars will be fully electric; larger vehicles will adopt hybrid technology. In contrast, Lynk & Co will concentrate on small to mid-size vehicles, using electric power for smaller models and hybrid systems for mid-size ones.

Strategic timing

Geely's decision comes at a critical juncture. China's new energy vehicle market is currently dominated by hybrids and range-extended models.

This reflects the reality that consumers are still cautious about fully electric vehicles due to concerns about battery range and an insufficient network of charging stations. Plug-in hybrids and range-extended models remain a popular choice, offering flexibility for uncertain conditions.

As a result, auto groups with diverse portfolios, like Geely, are at risk of internal cannibalization, especially when product lines begin to blur.

That's how Zeekr, originally a pure-play electric brand, and Lynk & Co, a combustion vehicle specialist, found themselves on a collision course, highlighting the inherent challenges of a multi-brand strategy.

Streamlining the strategy

As one of China's largest automotive groups, Geely operates more than a dozen brands, from the no-frills Geely series to the mid-tier Lynk & Co and Zeekr, and luxury names like Volvo and Lotus. It also holds a 9.69 percent stake in Mercedes-Benz and 17 percent of Aston Martin.

This multi-brand approach has allowed Geely to cover a broad spectrum of the market, catering to diverse consumer preferences across multiple price segments.

However, the downside is also obvious. With a richer portfolio, the potential for internal conflicts and resource duplication is higher, particularly in the rapidly evolving and highly competitive Chinese market.

In the face of these challenges, Geely recently unveiled what it called the "Taizhou Declaration." It's a strategic blueprint emphasizing five key areas of company priorities: strategic focus, integration, collaboration, stability and talent development.

This new roadmap represents a departure from previous expansion-driven strategies with a more focused, integrated and streamlined approach, prioritizing electric, smart, connected and shared mobility.

Geely's leadership has openly acknowledged that the company must slow its expansion in the current economic and industry climate, favoring consolidation over aggressive acquisitions. This could mean fewer large-scale purchases like the Volvo and Lotus deals, and a closer examination or even liquidation of underperforming assets.

From Ningbo to Taizhou: Lessons from history

Geely's current strategy echoes its past. In 2007, its "Ningbo Declaration," issued by Founder and Chief Executive Officer Li Shufu in front of more than 100 dealers in the eastern city of Ningbo, marked a turning point in the company's history.

It came as China's car market had erupted into a price war, triggered when automaker Chery's QQ model, a two-seat car that cost less than 30,000 yuan, gained immense popularity.

In response, Geely launched its nano-car in 2005, priced at just 27,600 yuan. The move paid off, with the company's total sales skyrocketing from 12,000 units in 2004 to 124,800 in 2006.

But reliance on low prices squeezed margins and impacted quality and the user experience.

Sensing that this short-sighted strategy could jeopardize the future and wary about what others were touting as a triumph of affordability and accessibility, he decided to pivot.

Geely began focusing on quality and innovation over mere sales volume, aiming to build a brand that consumers could trust for the long run. This shift marked the beginning of Geely's transformation from a budget carmaker to a global automotive leader.

This move set the stage for landmark acquisitions like Volvo and the development of Geely's advanced proprietary technology.

Seventeen years later, the "Taizhou Declaration," born in Geely's birthplace, the Zhejiang Province city of Taizhou, is apparently symbolic. It seeks to guide Geely through another transformation, this time into the era of intelligent and electrified vehicles.

While the long-term results of this strategy remain to be seen, it's clear that Geely's second major transformation has begun, with the Lynk & Co-Zeekr merger leading the way.

(The author, a former Shanghai Daily opinion writer, now works as a business analyst and communication strategist. He has no conflict of interests to declare.)