It has been a busy year for Geely as far as launching new brands is concerned.
A week after launching its new passenger vehicle brand LYNK & CO in Gothenburg and Berlin as potentially a “Volkswagen killer,” the private carmaker and owner of Volvo Cars launched Yuancheng Auto – a new brand that will now take on the established commercial vehicle manufacturers – in Chengdu on October 26.
The announcement comes at a time when the commercial vehicle sector is not only facing headwinds – the sector has been shrinking over the last few years (although this year it is slightly up) and faces severe overcapacity issues, but also a scandal involving mostly bus makers cheating on national new energy vehicle subsidies.
For Geely itself, which just celebrated its 30th anniversary of founding on November 6, the launching of two new brands within a week of each other signals that it is again going back to its multi-brand strategy of a decade ago that eventually failed. The difference this time, though, is that Geely is not launching new brands within one sector like it did last time, but rather expanding into new segments. It also reflects Geely’s ambition of becoming a full blown automotive group that covers all segments of the market, not only passenger vehicles.
The company’s move into the commercial vehicle segment is not a sudden one and it again has used its acquisition tactics similar to its purchase of Volvo Cars to boost its credentials as a Chinese automaker to be reckoned with. It has been preparing for this day ever since it purchased Britain’s Manganese Bronze (London Taxi Co.) in 2013, after which it established the commercial vehicle project team. The most recent acquisition is the purchase of Dongfeng Nanchong Automobile Co., which gives it an important production base for trucks and buses. It also has a bus and truck production base that is being built in Shanxi Province and another production base in Yiwu, Zhejiang Province, which added together gives Geely a combined production capacity of 200,000 commercial vehicles including light trucks, heavy-duty trucks and buses, as well as vans and pickups.
The other secret to Geely’s bet on commercial vehicles besides the acquisition tactic is its weapon of alternative propulsion, not in the form of electrics but rather in technologies like range extenders and methanol. The range extenders, thanks to Volvo Cars, are a result of Geely’s own improvement and tailored toward commercial vehicles. Methanol, on the other hand, has been a “staple” for Geely because it has been developing this technology since 2005 in its passenger cars and has put vehicles into demonstration in numerous cities.
In a sense, Geely arrives in the commercial vehicle sector not unprepared, but rather equipped with its own unique weapons that may actually work to its favor as subsidies for EVs phase out.
The debate will linger on whether Geely’s move into the commercial vehicle sector is a smart or dumb decision. But just like the brand name – Yuancheng, which means “long journey” – the journey is on and it will be long and arduous.