HONG KONG/SHANGHAI (Reuters) – China’s Geely said on Thursday its premium electric vehicle maker Zeekr plans to take control of Lynk & Co, a sister brand – the first big restructuring move in a planned overhaul for the sprawling automotive group.
Geely Holding, which owns the two marques as well as 10 other automotive brands, has pivoted away from its history of aggressive acquisitions to streamlining its operations and cutting costs.
Group Chairman Eric Li told staff in September that deep integration was needed to improve efficiency and reduce costs. All brands in the group should clarify how their models are positioned to avoid overlap, he added.
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Geely said it wants Zeekr and Lynk to form a new energy vehicle manufacturing group with combined annual sales of more than a million units. That compares with about 339,000 vehicles for the two brands in 2023.
“If we don’t integrate (Zeekr and Lynk), we must face issues such as internal competition … and redundant investments in many aspects such as R&D, sales, which is stupid,” Gui Shengyue, chief executive of Geely Automobile Holdings told a conference call with analysts after the announcement.
“If we don’t do it, the overall competitiveness of Geely definitely would not be improved.”
The deal provides for Zeekr to purchase a stake of 30% from another group firm, Volvo Cars, and a stake of 20% from Geely Holding, the group said in a statement.
Shares in Volvo Cars were up 3.5% in early trade, among the biggest gainers on the pan-European STOXX 600 index.
U.S.-listed shares of Zeekr dropped over 7% in premarket trading on Thursday after the announcement.
Zeekr will then nudge its stake up to 51% with a capital injection while Geely Auto, the group’s main listed arm, will continue to own the rest.
The deal values Lynk, a Chinese-Swedish brand, at about 18 billion yuan ($2.5 billion). It should be completed by June next year, a person with direct knowledge of the plans said.
Details of the transaction were first reported by Reuters.
Within the group, Zeekr is expected to lead innovation for electric and connected vehicles, sharing that research with other brands including Lynk and Polestar, said the person and a another source with direct knowledge of the plans.
Lynk’s product team started to report to Zeekr CEO Andy An last week and there have been discussions about leveraging more technologies and components shared by the two automakers, one of the sources said.
Geely declined to comment on the information from sources.
Resource sharing would reduce R&D costs by 10% to 20% for Zeekr and Lynk combined, lowering the bill for materials by 5% to 8% and improve capacity utilisation, An told analysts on Thursday.
It would also help Zeekr brands to sell into lower-tier cities with Lynk’s sales network there, he added.
Lynk’s two latest EV models, the Z10 and Z20, share the same architecture used by Zeekr’s cars while its gasoline and hybrid models use different platforms developed by Geely and Volvo Cars.
Lynk, which was launched in 2016 and currently has nine models, sold roughly 195,600 vehicles in the first nine months of the year, an increase of 40% over the same period a year ago.
By comparison, Zeekr, a three-year-old brand, sold almost 143,000 cars during January to September with six models, up 81%.
Zeekr shares have climbed almost 40% since listing in New York in May, giving it a market value of $7.3 billion.
($1=7.2425 Chinese yuan)
(Reporting by Julie Zhu in Hong Kong and Zhang Yan in Shanghai; Editing by Edwina Gibbs and Clarence Fernandez)
