The venerable Volvo brand, known for reliability and safety, was sold yesterday by Ford to The Zhejiang Geely Holding Group. Based in Hangzhou, and its majority-owned automotive subsidiary, Geely Automobile Holdings, is ranked #12 in overall production. Geely autos has made significant inroads manufacturing subcompacts and less expensive compacts – and now, it joins the big boys at the top.
The company is tightly controlled by founder, Li Shufu, a farmer’s son, who leveraged a motorcycle parts business into the successful and fast-growing company it is today. At the press conference Sunday in Goteborg, Sweden, Li said, “I want to emphasize that Volvo is Volvo and Geely is Geely — Volvo will be run by Volvo management. We are determined to preserve the distinct identity of the Volvo brand.”
Geely has been in the running to purchase Volvo since fall 2009, but issues of financing and trade secrets had to be overcome. In addition, there was resistance from Swedish labor and political influencers to the deal. The near devastation of the Saab brand in 2009, helped grease the skids for the Chinese deal to happen.
The challenge remains for Geely Auto to produce up-scale cars for the masses at affordable prices. The average car price in China is $17,000 (J.D. Power & Associates). The Volvo brand will be a luxury item in the Chinese car market that forecasts a jump in purchases from 300,000 in 2009 to 650,000 by 2015.
Maud Olofsson, Swedish deputy prime minister summed it up thus: “The future road for Volvo Cars is now defined. Regardless of who owns Volvo Cars, its brand will still be Swedish.”
A brand with a distinct DNA such as Volvo, questions comes to mind – What makes a brand a brand and how will such real and perceived cultural differences and objectives – affect the outward perception of the brand? More on this when I have some more time.