25 days after the official announcement of the merger between Jike and Lynk&Co, there have been some new developments.
21st Century Business Herald reporters have learned from multiple sources that Jike's intelligent driving department is already developing intelligent driving for the upcoming facelift model of Lynk&Co next year, in parallel with the existing Jike intelligent driving project. Supply chain and finance are also trying to merge and streamline, while the organizational structure of other departments, including product and research and development, has not undergone significant changes yet.
More than a month ago, before the official announcement, Jike had already received the demand for the Lynk&Co intelligent driving project internally. Now, they switch between different projects every day, and the workload is very saturated, "said a Jike intelligent driving business professional.
Multiple insiders have said that as early as the first half of this year, senior management had been discussing merging multiple brands to cope with the fierce competition in the current auto market, but the difficulty was not small. "Each brand has developed to a certain stage, with its own strong personality traits, as well as a certain user base and brand awareness. Brand integration will be a big project
The boots officially landed on November 14th. On that day, Volvo announced that it would sell its 30% stake in Lynk&Co to Jike; Geely Group also announced that it will transfer its 20% stake in Lynk&Co to Jike, while Jike will ultimately hold 51% stake in Lynk&Co through capital increase. As a result, Lynk&Co became a subsidiary brand controlled by Jike, and the two brother brands officially merged.
On December 3rd, Jike officially announced that the name of the new company after strategic integration will be "Jike Technology Group". However, Jike explained that the company entity of "Zhejiang Jike Intelligent Technology Co., Ltd." has not changed, and only has the dual brands of Jike Automobile and Lynk&Co Automobile.
The merger process was adjusted according to An Conghui's plan, with Jike taking the lead in the entire process. The integration was difficult, and a lot of information was also changing, "a Lynk&Co employee told 21st Century Business Herald reporters.
Jike CEO An Conghui shared the idea of merging at Geely's third quarter financial report conference - to maintain the independence of Jike and Lynk&Co in the market, but to maximize collaboration in technology and differentiate in product planning.
An Conghui explained that at the level of intelligent cockpit, both parties maintain consistency in hardware, base software, and middleware; At the application layer, Lynk&Co retains Meizu OS, while Extreme Krypton retains Extreme Krypton OS. In terms of vehicle models, Jike sells medium to large-sized cars, while Lynk&Co focuses on small to medium-sized cars; In terms of energy form, Lynk&Co focuses on pure electric for small cars and hybrid for mid size cars; Jike focuses on pure electric vehicles in mid size cars and hybrid vehicles in large size cars.
That is to say, both parties will maintain relative independence in the terminal sales market, but maximize collaboration and focus in the background.
An employee of the intelligent cockpit hardware department at Extreme Krypton said that there have been no new changes in personnel structure or projects in the cockpit hardware, but the merger is a good thing for employees because projects will increase and people will be busier, which to some extent reduces some potential layoff risks. Previously, the job market was already saturated, and if there were no new projects coming in and we didn't need so many people, we might have to lay off employees again
Although the merger is not easy, the former 'independent leader' had great ambitions.
According to the plan of Jike, by the end of 2026, Geely Holding is committed to building Jike and Lynk&Co into a globally leading high-end luxury new energy vehicle group with an annual production and sales volume of 1 million. To achieve the sales target of 1 million vehicles, BYD, Tesla, and Ideal took 13 years, 12 years, and 4 years and 10 months respectively.
With the support of multiple brands, Geely has risen to become the "independent leader"
The reason for choosing to merge the two companies through acquisition is that Geely has had multiple successful experiments before this.
In 2007, Geely released the Ningbo Declaration, and since then, it has been adopting an expansion strategy, taking "having more children makes fighting easier" as its guiding principle. In August 2010, Geely acquired Volvo's sedan business (hereinafter referred to as Volvo) from Ford for no less than $1.8 billion, marking a "snake swallowing elephant" acquisition transaction in the history of the global automotive industry.
At that time, Volvo had a pre tax loss of up to $1.5 billion and also owed $3.5 billion in debt to Ford. Li Shufu, known as the "car enthusiast," said a "wild talk": "Geely plans to turn Volvo's losses into profits within two years." In Li Shufu's view, Volvo is a high-end luxury car company respected globally, "with a very complete system of research and development, manufacturing, sales, service, talent cultivation, parts system, and basic research related to automobiles
In the end, Li Shufu succeeded. In 2016, seven years later, Volvo Cars successfully achieved an operating profit of 1.25 billion US dollars, which was also the best performance report submitted by the Swedish automotive company in 90 years.
Acquiring Volvo has also brought great benefits to Geely. Since 2013, Volvo and Geely have jointly developed a new generation of basic module architecture CMA and related components, which has become the most important platform architecture for Geely in the future. Almost all models from A-class to D-class can be derived and developed on this platform architecture.
In 2016, Geely and Volvo established the high-end brand Lynk&Co with the intention of competing with other joint venture car companies. At its peak, Lynk&Co's annual sales reached 220500 units (2021), representing the rise of domestic independent brands.
Since then, Geely has embarked on a path of buying and buying, acquiring Proton and Louis, investing in Daimler, and acquiring the American Taipower Flying Car, etc., to climb up the ranks of a global empire.
With the support of multiple brands, Geely achieved a sales volume of 1.248 million vehicles in 2017 and maintained its position as the "independent leader" for the following four years.
While expanding, internal friction cannot be avoided
A multi brand strategy, in the era of growth, can help the group seize more markets, bring more innovation and expansion opportunities, but at the same time, it also brings about duplicate development and resource waste. Several Geely engineers bluntly told 21st Century Business Herald that integration is really needed. "Sometimes when the headquarters develops something, sub brands will repeatedly develop the same thing
For example, the core of Geely Holding Group is Geely Automobile Group, which includes four brands: Geely, Lynk&Co, Ruilan, and Proton. Geely Research Institute is responsible for the functional research and development of each brand's vehicle models. In addition, Geely also has independent sub brands such as Jike, Lotus, Volvo, and Jixing, all of which have research and development teams of different sizes.
An employee of Geely Group also told 21st Century Business Herald reporters, "Even after working in the company for many years, it is difficult to clarify the equity relationships of various brands
The problem of duplicated resources also occurs in the brands of Jike and Lynk&Co.
Jike's predecessor was the electric vehicle business group of Lynk&Co, which became independent from Lynk&Co in 2021. The product design and platform architecture of Jike's first product 001 followed the concept car Zero concept of the Lynk&Co brand. In the early days, both design teams were located on the same floor in their European offices.
In the early stages, there was a clear distinction between Extreme Krypton and Lynk&Co - one only focused on pure electric vehicles, while the other only focused on hybrid models. However, with the official launch of pure electric series Z10 and other models by Lynk&Co, and the relaxation of range extension and hybrid technology by Jike, it is inevitable that there will be overlaps and intersections between the two. For example, the selling price of the Lynk&Co Z10 is highly similar to that of the Extreme Krypton 001.
In addition to the selling price, some models of the two brands also use similar design language. For example, the front face of the 2022 Lynk&Co 03 is quite similar to the Jike 001, with narrow daytime running lights on both sides of the hood and a through grille at the front.
If two brands are not integrated, there will continue to be situations where you influence me and I influence you. This situation is unfavorable for Geely Group, which is currently in a fiercely competitive market, "explained Gui Shengyue, CEO and Executive Director of Automotive Holdings Limited.
Jike Lingke merger, now is the best time
Geely is also aware of this. In September of this year, Geely released the "Taizhou Declaration". The Declaration can be summarized in one sentence - focusing on Geely Group, which is the core of the Declaration, "said Gui Shengyue, CEO of Geely Automobile Holdings Limited.
After the release of the Taizhou Declaration, Geely took various merger actions: in September, Geometry was merged into the Milky Way; In October, Geely acquired Ningbo Passenger Cars; In November, Jike and Lingke merged.
In the view of Gui Shengyue, merging the brands of Jike and Lynk&Co now is the best time for both parties
On the one hand, Lynk&Co's European business is experiencing losses, and the current valuation of Lynk&Co is severely undervalued. "I believe this valuation will be the lowest point in history. Gui Shengyue believes that Lynk&Co's European business has begun to transform, and its domestic business is also developing positively. "We are full of confidence in its future development.
On the other hand, the momentum of Jike's development is evident to all. Geely Automobile Group believes that Jike has huge potential for appreciation. The acquisition of Jike's shares by the group is a suitable arrangement for Geely Automobile's minority shareholders, given the current trend of Jike's stock price
At the same time, the cooperation between Geely Automobile and Volvo also needs to make strategic adjustments. As a shareholder of Lynk&Co, Volvo has also completed its phased mission
There are opinions from the outside that Geely Holding Group's merger with Lynk&Co and Jike is aimed at "trading cash out". But Gui Shengyue said that this transaction is led by Geely Automobile, with the aim of strategic integration. At the same time, all shareholders of Geely Automobile may gain huge profits from this transaction, but for Geely Holding Group, cashing out is passive. Geely Holding will use the cash obtained from the sale of Jike shares as debt financing to provide Jike with the integration with Lynk&Co
The benefits of integration are obvious - it can eliminate industry competition, allow the positioning and sales channels of the two brands to complement each other, and also help improve the product portfolio. After collaboration, R&D investment can be reduced by at least 10% -20%; it is not a problem to reduce BOM costs by 5% -8% through supply chain and scale effects, "said An Conghui.
As for whether there will be similar transaction projects in the future, An Conghui said, "The company has not considered other potential transactions or mergers and acquisitions. The core of improving valuation and resolving valuation liquidity is to provide better performance to the market
Not only Geely, but many other major automobile groups are also merging and focusing. It is reported that the R&D teams of Feifan and Zhiji Automobile under SAIC have also been announced to be integrated and merged into SAIC Research Institute.
Platformization can improve both R&D and supply chain efficiency, but how to balance the personalization required by the high-end brands nurtured by these leading car companies is also a topic that group leaders need to consider.
A supply chain executive from a leading car manufacturing company told 21st Century Business Herald that the company has been promoting platform based development since last year, even including seats, but the R&D leader is also struggling with "how to preserve individuality at the same time".