Acquisition for alliance: integration dynamics between Geely and Volvo

Publication Type:

Conference Paper


Gerpisa colloquium, Detroit (2020)


acquisition, Alliance, China, Geely, Sweden, volvo



Acquisition for alliance:

integration dynamics between Geely and Volvo



Giovanni Balcet, Department of Economics and Statistics, University of Turin

Joël Ruet, CNRS / CEPN University Sorbonne Paris Nord

Hua Wang, EM Lyon Business School

Xieshu Wang, CNRS / CEPN University Sorbonne Paris Nord



JEL classification: F23 Multinational Firms, G34 Mergers and Acquisitions, L62 Automobiles, O25 Industrial Policy, O32 Management of Technological Innovation and R&D





    This paper has a double purpose: a case-based assessment of Geely-Volvo alliance formation and a theoretical analysis of the hybridization of local industrial policy and multinationals’ global strategies. In the perspective of providing relevant lessons for the current trend of M&A and alliance between major OEMs, our conclusions state that:

1) Geely-Volvo, starting from a clear capital acquisition, has in fact operated like an alliance, only gradually moving towards a merger through a long period of post-acquisition integration across different phases, evolving from a static complementarity to a dynamic one.

2) This process is facilitated by a supportive ecosystem based on proactive industrial policy and a carefully managed integration under the multinational long-term strategies, in the face of considerable business challenges ahead.




   Ten years have passed since the sensational acquisition of the famous Swedish Volvo Car Group by the then unknown Chinese Zhejiang Geely Holding Group, a milestone event in the history of EMMs (emerging economy multinationals) development. Since then, both Geely Group and Volvo Car Group have shown impressive growth, parallel in the Chinese market and the global market, supported by a series of coordinated investments to increase new production capacities and to build joint R&D facilities.

   Despite a global market downturn, Geely Group across its three auto subsidiaries[1] reached total retail sales of 2.178 million units in 2019, keeping its position as the best-selling Chinese brand. Volvo Car Group, at the same time, has almost doubled its sales[2], largely thanks to its 5 times market volume growth in China. The success of Geely-Volvo is not just in sales numbers, but also on their new brands and new products, the highest product quality and production standard, the creation of state-of-art scalable architectures for multiple models, the active transition to electrification, and above all, a long-term strategy of auto industry vertical integration and its global market deployment.




   The case of Geely-Volvo is even more interesting due to its particular background and characteristics: 1) the auto industry in China has certain regulatory rigidity (joint venture obligation) which might have played ambiguous roles on the post-acquisition integration; the involvement of local governments might have been invisible but influential; 2) given the huge differences (cultural, technical competence, managerial style, industrial experience) between Geely and Volvo, it seems very difficult if not impossible to achieve a certain level of integration and create significant synergies, without falling into the typical trap of post-acquisition conflicts. This realistic understanding should not be underestimated; it conveys a learning process in terms of strategic management, as in the past other European alliances around Volvo had failed to reckon this.


Contribution to the literature


    Many studies are analyzing the Geely-Volvo case from the post-acquisition management perspective.[3] By recalling the well-known sayings of the Geely Chairman Li Shufu, “Geely is Geely, Volvo is Volvo” and “releasing the tiger back into the mountains”, we want to emphasize the mostly crucial and intelligent decision to keep Geely and Volvo as two separated entities as managerial learning process. After the acquisition, a strong standalone governance based on the principles of the Swedish Governance Code has been established at Volvo Cars, including independent Board of Directors and an Executive Management Team, guaranteeing its independency and integrity. Therefore, it is more reasonable to consider the Geely-Volvo relationship as an alliance instead of a traditional acquirer-acquired subordination.


    Based on this, our research aims to understand: 1) why this Geely-Volvo alliance has worked, while many other attempts regarding Volvo have failed before (Renault, Ford); 2) and what lessons can we draw from it, especially in the observation of increasing M&A and alliances between major OEMs in the face of considerable business challenges ahead. Our paper will analyze the formation of Geely-Volvo strategic alliance under the framework of global value chain reorganization, with a particular focus on complementarities.


Analytical structure


    In a first place, we propose a static analysis of the value chain position of Geely and Volvo at the time of acquisition.

1) Geely and Volvo had different market focus and brand segmentation: Geely was mainly focused in the Chinese domestic market and its brands were middle to low end; Volvo was mainly focused in the European and the US markets and its brands were at premium level.

2) Geely and Volvo also had different competences: Geely had higher comparative advantages in the supply chain and cost management; Volvo was more expert in engineering, architecture and process design.

3) Their financial capacities were different: Geely could leverage political support from the pro-business Chinese local governments to gain easier loans from Chinese banks; Volvo was financially in crisis since years and was not able to pursue its global development. Based on these factors, we argue that Geely and Volvo had quite different positions along the auto industry value chain. Therefore, it was possible to make advantages of their complementarity, under a strategic alliance. Meanwhile, through its previous experience of technology upgrading and global development, Geely also had reached a good level of absorption capacity, allowing it to adapt quickly to Volvo’s high quality and high standard. In comparison, Renault and Ford had too strong competence correlations with Volvo (similar market focus, engineering expertise) and not enough out-of-market financing capacity, which was not favorable to the formation of a complementarity-based alliance.


    In a second place, we make a dynamic analysis of the step-by-step construction of Geely-Volvo alliance through gradual integration, following the trajectory of the past ten years’ key projects development.

- Step 1: Financial integration to revive Volvo: given the high costs of raising financial resources from HK stock exchanges, Geely and Volvo together applied for 3 billion euros’ credit from China Development Bank, which provided solution for the new projects of Volvo in China; Volvo and Geely have invested in 4 JVs (3 assembly lines and 1 engine plant) subsidiaries of Volvo Cars.

- Step 2: Technology integration through platform cooperation: by inviting Volvo’s independent directors to visit Geely’s R&D center, assembly lines and suppliers, Geely convinced Volvo to cooperate on platform development (the CMA platform) for reducing cost and enhancing supplier premium; in particular, the establishment of CEVT, the Gothenburg based R&D center owned by Geely and built by Volvo, provides the organizational structure for deep innovation cooperation and stronger synergy.

- Step 3: Strategic integration with new brands and new business models for future mobility: Geely and Volvo co-developed and co-own the premium brand Lynk & Co. and the electric brand Polestar; new business models (LEVC electric taxi, CaoCao Mobility, Lynk & Co.’s usage sharing model in Europe, autonomous driving) have been adopted to compete in the new era of MaaS (mobility as a service).


Behind these three steps of deepening integration, we want to single out two aspects:

1)  On the industrial economic side, the alliance of Geely-Volvo has worked also thanks to the favorable ecosystem in China and the strategy to integrating local supply chain. The governments of the locations of Volvo’s Chinese JVs strongly welcomed Volvo’s implantation and cooperation with local partners and suppliers, hoping to improve local companies’ competitiveness and build a regional industrial cluster.

2)  On the management studies side, inter-cultural management is another key subject of post-acquisition integration; conflicts originated from culture embeddedness, corporate value, identity and miscommunications, could eventually destroy the reunion. In the case of Geely-Volvo, on one side, mutual respect and trust have been promoted between the two groups, letting each other conserving its own identity while making efforts on improving communications; on the other side, some organizational measures and routines have been built and adopted between the CEVT and Geely, and also between Volvo’s Chinese JVs and Volvo headquarter, which allows a seamless cooperation on tasks and procedures cross borders. Moreover, international training, visit, internship and collective activities are organized on a regular basis to improve team building and cultural integration.




   Through contextualization, these distinct approaches will help us disentangle the “Chinese characteristics” vs the “generic lessons” from this case, and draw some first theoretical conclusions on “acquisition for alliance”.

    We recall that the full acquisition provided Geely with a special occasion to enter into a real strategic alliance with Volvo Cars, but it also presented many risks. It was quite different from the traditional form of Foreign-Chinese joint venture, imposed by the auto industry regulation in China in the past, which only regards local production and domestic market, therefore does not really represent a relationship of global strategy alliance. The success of Geely-Volvo post-acquisition integration depends both on their value chain position complementarity - from the static analysis - and on the gradual establishment of a trustful and reciprocal will to share resources (financing, suppliers) and competences (technology, engineering, innovation, management), creating stronger and durable complementarity - from the dynamic analysis. The post-acquisition integration is, from this point of view, the evolution from a static complementarity towards a long-term dynamic complementarity, based on a shared vision of industrial trend and a coordinated global strategy. This process can be facilitated by a supportive ecosystem and a carefully managed cultural integration.

[1] Geely Auto, Volvo Car Group and Geely New Energy Commercial Vehicle Group.

[2] From 373,525 units in 2010 to 705,452 units in 2019

[3] See Giovanni Balcet, Hua Wang and Xavier Richet, “Geely: A Trajectory of Catching up and Asset-Seeking Multinational growth,” International Journal of Automotive Technology and Management 12:4 (2012), 360–375; Claes G. Alvstam and Inge Ivarsson, “The ‘Hybrid’ Emerging Market Multinational Enterprise - The Ownership Transfer of Volvo Cars to China,” in Asian Inward and Outward FDI: New Challenges in the Global Economy, Eds. C. Alvstam, C., Dolles, H., and Ström, P. (London: Palgrave Macmillan, 2014), 217-242; Ramsin Yakob, “Augmenting Local Managerial Capacity Through Knowledge Collectivities: The Case of Volvo Car China,” Journal of International Management, 24 (2018), 386-403; Ramsin Yakob, H. Richard Nakamura, Patrik Ström, “Chinese Foreign Acquisitions Aimed for Strategic Asset-Creation and Innovation Upgrading: The Case of Geely and Volvo Cars,” Technovation 70/71 (2018), 59-72.

GIS Gerpisa /
61 avenue du Président Wilson - 94230 CACHAN
+33(0)1 47 40 59 50

Copyright© Gerpisa
Concéption Tommaso Pardi
Administration Géry Deffontaines

Powered by Drupal, an open source content management system