Tuesday, March 30, 2010

My view of China's Geely takes over 100% ownership of Volvo


Personally, I found it's ironic that Volvo was sold to Geely.  I think this may symoblize a "tipping point" of Volvo's brand reputation in a bad way.

As it says, Volvo cars have long been marketed and stessed their historic reputations for solidty and reliability.  (At least some) Volvo owners praise their ownerships.  You go to a car show, and you rarely find a conceptual and "futuristic" Volvo on display.  The company cuts their car in half, show you the cross-section with in-door frame enforcements and 12-airbags - they emphasize on today's road safety more than anything else.  Most Volvo may look boring from the outside (although they've tried to change in last a few years), but I know people who purchase a Volvo because of the "safety factor" alone.

I "down-graded" the Volvo brand in my mind ever since Ford took over the owernship from its Sweden counterpart in 1999.  I believed the "reliability" part of the brand would start deteriorating because the reliability of Ford's cars suck (period).   I have to say I have a personal bias against Ford.  My family owned a Ford Taurus before.  Although it was a well designed family sedan, it was definitely NOT designed for "Built Ford Tough" - everything falls apart as the car aged, the water pump, the electricals, the A/C, the transmissions, you name it!  However, I still thought Ford would keep the "solidty" part of the Volvo brand.  Ford had the technologies, and Volvo had the design IPs.  Give the car enough airbags, and you get a Volvo that's (still) crash-proof.

...That's until Geely takes over Volvo, 100%.  Those ever used an IBM-made T40 laptop and later changed to a Lenovo-made T60, they know exactly what my worries are!  Chinese products in general are considered as low-quality per reputation.  They are typically not well designed, and they are typically lack of originality and manufacturing quality because Chinese companies tend to treat low-cost of their products as the number one priority.  While the Volvo brand, in my mind, might still have the"solidty" part when it was owned by Ford, I think it would be totally go away after Geekly takes over.  I anticipate Geekly would be more aggressive on the marketing side to grow Volvo's revenue in existing markets and cut back long-term and strategic R&D investments.  One of the vehicles to achieve quick revenue growth is to reduce the price and trade off with design quality.  Geely may also add some "Chinese flavored" design decorations to new product models, so soon enough people will no longer see the design DNA from Sweden or American - Am I being pessimistic?

I think part of the strategy that Geely goes after is to leverage the design IPs from Volvo and transfer them into Geely's home-grown Chinese cars. This will help Geely improve their technology, increase their competitiveness among Chinese domestic car companies (e.g. BYD) and accelerate Geely's penetration to the North American market.  Perhaps in 10 years, if the Volvo brand will last for another 10 years, Geely will sell Volvo as the luxury brand and grow the Geely brand in the North America market, just like how Toyota uses the "Toyota" and "Lexus" names today.

At the moment, it might be too early to tell, but I'm not optimistic about the future of Volvo.  All eyes on Geely.


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