Built on sand - no way! Li Shufu, who came from a poor background, sculpted his first cars out of sand as a young boy. "We couldn't afford toys," he said in an interview with Forbes Asia, adding, "I couldn't imagine building a real car." But Li has risen above: the now 53-year-old is the proud owner of Geely, one of the most successful car companies in China. As a result, he rose from being a farm boy to currently being the 89th richest person on earth.
However, the self-made billionaire has long since not limited his business activities to the Middle Kingdom, but has also been stretching his feelers beyond the domestic borders for some years now. In 2010, Geely bought Volvo Cars for USD 1.8 billion. But that's not all: Eight years later, the Chinese acquired a stake of just under 10% in Daimler. These deals catapulted Shufu into the premier league of the auto industry.
Both investments are already bearing fruit. The Geely/Daimler joint venture, launched in 2020, is currently focusing primarily on the German Smart subcompact car brand to get it back on track. For example, an all-electric Smart SUV is planned for next year, and rumor has it that it could debut as early as the 2021 IAA in Munich. Alongside this, the duo are also looking to develop a new petrol engine by 2024, which will be used for Mercedes hybrids in particular.
Geely's core competence, however, is less the combustion engine and more the e-engine. This, in turn, is also evident at the Swedish subsidiary. Volvo will build only electric-powered vehicles from 2030. Already by 2025, half of the group's revenues are to come from the sale of electric cars and the other 50% from hybrid models. The plan also calls for 600,000 battery-electric vehicles to be sold by the middle of the decade and a European battery gigafactory with a production capacity of a whopping 50 GWh to be built in 2026. However, the transformation to a fully electric carmaker requires a lot of money. The capital market could help in this regard, and Volvo Cars CEO Hakan Samuelsson is currently thinking out loud about an IPO: "We are looking at the possibility of an IPO before the end of the year."
In 2017, Geely and Volvo launched Polestar, an e-car start-up, to give a boost to electrification. The manufacturers developed a highly acclaimed electric car in the form of the Polestar 2 sedan, which was recently launched on the market to rival the Tesla Model 3. This not only replaces Polestar 1 with its hybrid drive, but also resembles a sports car in terms of driving performance thanks to an output of 300 kW. The next models Polestar 3 and Polestar Precept will also be powered exclusively by battery.
The promising cooperation with Daimler and Volvo is not Geely's only trump card, however; the Chinese are trying to literally electrify the car market with other new brands. With success: the recently launched premium electric vehicle brand Zeekr is already sold out for this year. In total, the Geely holding company has more than ten car and light truck brands, of which 1.53 million units are to be sold this year. However, Geely still has some stretching to do to reach this target: It sold around 630,000 vehicles in the first half of the year, just 41% of its forecast figure.
Sales figures, which are still a bit slow, could be one reason why Geely's stock is not getting off the ground at the moment. Since the beginning of the year, the stock is even almost a tenth in the red. A look at the technical chart gives cause for hope and anxiety at the same time. On the positive side, the share was able to put the sharp downward trend between January and May to rest. However, the subsequent countermovement is now also threatening to run out of steam. On the one hand, horizontal resistances in the area of HKD 24/26 stopped the short-term upward trend. On the other hand, the stock is close to a so-called "death cross". In a death cross, the shorter-term average, in this case the 100-day line, dips below the longer-term 200-day average from above. If this does occur, it could result in a downtrend. Solid supports are available for Geely in the HKD 20 area in this case.
In order to achieve a maximum return of 9% p.a. with the new CHF-denominated reverse convertible on Geely, the stock is likely to dip even a little more. The product has a risk buffer of 35%, resulting in a barrier level of HKD 15.60 at the current share price of HKD 24.00. Geely last traded at this level in October 2020, so a sideways move is quite enough to successfully complete the investment.
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