Geely "slimmed down" 3 parts companies were stripped

On November 7th, Geely Automobile (00175.HK) announced its acquisition announcement, informing its 99%-owned subsidiary, Jilin Luoyou, of acquiring Zhejiang Geely’s Baoji Geely Engine Co., Ltd., Zhejiang Geely and Shanghai Huapu. Lily Auto Parts Co., Ltd. and Geely Holding's Ningbo Shangzhongxia Automatic Transmission Co., Ltd. have a total of 3 companies with registered capital of a total of 1.833 billion yuan. Why is there a huge amount of internal transactions? What is the purpose of Geely Automobile?

Geely has a long history of business integration

According to the Geely Automobile Bulletin, Baoji Geely Engine Co., Ltd. and Zhejiang Yili Auto Parts Co., Ltd. are mainly engaged in research, development, production and sales of automotive engines and related aftermarket parts. Ningbo Shangzhongxia Automatic Transmission Co., Ltd. is mainly engaged in R&D, production and sales of transmissions and related aftermarket parts.

It is also worth noting that the announcement also stated that Geely and Lead and Geely Holding entered into a powertrain system sales agreement on November 7th. Accordingly, after the completion of the aforesaid acquisition, the Group sold the automobile engines, transmissions and related aftermarket parts produced by these target companies to the Leadken Group and Geely Holding Group from January 1, 2018 to December 31, 2020. Day is a period of 3 years. The annual sales ceiling for the proposed powertrain system was RMB9.179 billion, RMB145.56 billion and RMB15.661 billion, respectively.

Geely Automobile intends to integrate the business in this move. In addition to the integration of the powertrain business, there is integration of the production and sales system.

A financial and media source who has been concerned about the development of Geely Automobile for many years told reporters that with these moves, Geely Automobile will revitalize assets, increase industrial integration, and reduce the cost of related party transactions. The person also said that Geely Automobile's business integration has a long history, and this announcement is only one step in its business integration.

In 2014, Geely Automobile opened the brand "slimming down" strategy, and Geely Automobile President An Zhihui publicly stated that Geely Automobile will More fully integrate Geely's resources in the future, and at the same time rely on external resources to build an internationally competitive automobile group. This has been particularly prominent in Geely's series of moves in the past two years, including the conversion of the joint venture of the Leadkers, the integration of new energy businesses, the integration of the powertrain business, and the related transactions between various businesses... Geely Auto Step by step, the pace of business integration will be stable, accurate and accurate.

Industry trend can not be reversed

"In fact, not only Geely Automobile, but now many car companies are using this model to enhance their market competitiveness." Cao He, President of All-Union Vehicle Investment Management Co., told reporters that the former BYD announced that it was peeling the car seat. Business to a new joint venture company, such a "downsizing" move of the car company is to combine the equity relationship, and the second is to integrate the business sector.

Cao He pointed out that this kind of operation mode can promote the business of car companies to be more clear, and thus achieve the best synergy between different sectors, increase operating flexibility, and prevent duplicate investment at the same time, which will help reduce the burden on assets. At the same time, Cao He also believes that with the independent operation of an advantageous business segment of the car company, it is possible to realize a full supply for the entire market. This is reflected in the spin-off of BYD's car seat business.

In addition to the integration of the different business segments of the automobile enterprises, there is a trend of cross-enterprise cooperation and sharing of advantageous resources within the industry. Such former SAIC, Dongfeng, and Changan cases have cooperated with the Ningde era in different forms. According to Ye Shengji, deputy secretary-general of the China Association of Automobile Manufacturers, car companies form a complementary cooperative interest community through equity participation, holding, and share exchange. This is a way to reduce production R&D costs, shorten product development cycles, improve quality, and realize economic benefits. Maximize the new model.