Though the Geely might have a light boat, Shufu still finds it difficult to traverse a thousand mountains.

JiKe 009 aims to be the "Rolls-Royce of China"!

At the JiKe 009 Glorious Edition launch event on April 19th, JiKe Intelligent Technology CEO An Conghui went straight to the point: the 009 four-seater version aims to be the Rolls-Royce of the intelligent electric era in the MPV segment.

Throughout the entire launch event, it was almost spent enduring wave after wave of hardcore technical specifications.

Although in terms of configuration, the 009 Glorious Edition's performance in various dimensions can almost surpass 99% of the million-level luxury cars on the market. It has the performance, intelligence, comfort... almost every luxury feature you can think of, JiKe has provided.

But there is also a sense of unease— as a high-end MPV with a price tag of over 800,000 RMB, it is evident that there has been a lack of serious and systematic consideration in both the product definition and the unique value proposition the brand wants to convey.

After watching the event, some people commented: Each individual element of the 009 is good, but when combined, it feels disjointed and lacks a decisive edge. For luxury cars, the worst thing is to have everything without a dominant feature.

Clearly, in the push to impact the super luxury car market, JiKe 009 is in a hurry. Ultimately, it is the listed company behind it, Geely Auto (00175.HK), that is in a hurry, and the current situation indeed requires urgency.

1. Geely's Usual State: "Robbing Peter to Pay Paul"

For Geely, there has always been a joke circulating: Geely has so many brands and models that even insiders may not be clear about it.

Although this statement is accurate, it is not entirely precise.

In 2023, Geely's total sales volume reached 2.79 million units, including Geely, Lynk & Co, JiKe, Volvo, Polestar, Lotus, Proton, Smart, Geometry, LEVC, Lynk & Co, Farizon, and Zeekr, among other automotive brands.

In terms of absolute scale, Geely Holding has surpassed Changan Automobile with 2.55 million vehicles, making it the fourth largest domestic automotive group after SAIC Group (5.02 million vehicles), FAW Group (3.37 million vehicles), and BYD (3.02 million vehicles).

For a private automotive enterprise, this is a very rare and remarkable achievement.

However, for investors, this data is somewhat unrelated to Geely Automobile.

This is because the actual listed company, Geely Automobile, only includes a few brands within its system, such as Geely, Geometry, Lynk & Co, Zeekr, and Icon.

In 2023, Geely Automobile sold a total of 1.6865 million vehicles, with Geely brand selling 1.31 million vehicles, the Galaxy series achieving total sales of over 83,000 vehicles, Lynk & Co 220,300 vehicles, Zeekr 118,700 vehicles, and Icon 38,000 vehicles.

From the publicly disclosed annual sales of automobiles, it is clear that Geely Automobile and Geely Holding are completely different concepts.

In simple terms, Geely Automobile is a part of the business territory of Geely Holding, the latter being an investment holding company that includes multiple factories engaged in manufacturing and selling complete vehicle sets and automotive parts, as well as subsidiaries engaged in the procurement and sale of related branded models.

However, given the complex relationship between Geely Holding and Geely Automobile, this also explains why Li Shufu is advocating for methanol vehicles, as once methanol vehicles gain momentum, they can be maneuvered between the two entities.

This is not without basis.

On February 20th this year, Geely Automobile announced that it would divest its electric vehicle business, Icon, from the listed company system, ultimately transferring it to Geely Holding.

At the time, Yang Xueliang, Senior Vice President and spokesperson of Zhejiang Geely Holding Group, publicly responded, stating that Geely's listed company transferred Icon's shares to Geely Automobile Group, and Geely will continue to support Icon's development together with Lifan, and increase its layout and investment in the field of electric vehicle swapping.

However, astute observers can see that this is another case of Geely Automobile's failed gamble.

As a domestic new energy vehicle brand vigorously developing the electric vehicle swapping business, Icon had once formulated ambitious plans for electric vehicle swapping development.

According to official plans, Icon planned to build over 5,000 ultra-fast electric vehicle swapping stations and cover more than 100 core cities by 2025.

Unfortunately, the sales of Ruilang automobiles are not doing well.

According to data released by Geely Automobile, Ruilang automobile sold 56,100 units in 2022. By 2023, its sales dropped to 38,000 units, a decrease of 32% compared to the previous year, making it the only subsidiary of Geely Automobile to experience a sales decline during the same period.

Geely Automobile's "abandonment" of Ruilang automobile is understandable, but it at least illustrates two points: firstly, in a fiercely competitive market environment, Geely's strategy of betting on multiple fronts requires very high capital demands, where the chances of success and the cost of failure are directly proportional; secondly, the relationship between Geely Automobile and Geely Holding, like the relationships between other companies in the Geely Group and Geely Holding, is a dazzling and complex existence.

This may also explain why, despite Geely Automobile's increasingly better sales in 2023, its stock price did not perform as well as expected.

In 2023, the company's stock price experienced a decrease of nearly 23%, exceeding the performance of the Hang Seng Index during the same period. Looking back over the past three years, Geely Automobile's stock price reached a high of approximately HK$35.83 per share, and this year it even fell to a low of HK$7.24 per share at one point.

2. Transformation: From Ineffective Transformation to Striving to Return to First Place

There are two "Fu" brothers in the Chinese automotive industry, one is Wang Chuanfu and the other is Li Shufu. Wang Chuanfu's BYD has seen its stock price soar and its sales top the charts due to its firm commitment to new energy routes, while Li Shufu's journey has been full of twists and turns due to his hesitance on the route.

Ineffective transformation was once a label for Geely Automobile.

In fact, from a timing perspective, Geely's transformation was not considered late.

As early as 2015, Li Shufu announced the "Blue Geely Action," stating that new energy vehicle sales would account for over 90% of Geely's total sales by 2020.

However, by 2023, Geely's sales of new energy vehicles only reached 487,000 units, an increase of 48.3% compared to the previous year, and their proportion of total sales was only about one-third.

Perhaps to boost morale, Li Shufu once said when discussing the failed plan, "It's not a matter of wrong strategic direction or failed strategic execution, but rather the historical timing was not ripe, and the external strategic conditions did not materialize."

He also said, "There are countless examples of such failures," and "We don't need to be discouraged by this."

The reality is more brutal than Li Shufu's words. The sluggish sales not only reflect external factors but also a series of mistakes made by Geely from car product design to sales and overall strategic planning.

It is worth mentioning that Geely's slow progress in pure electric architecture and hybrid systems is an important reason.

Compared to traditional fuel vehicle platforms, the software aspect of electric vehicles is constrained by the traditional electronic and electrical architecture (EEA), making it impossible to achieve OTA (over-the-air) function upgrades. The installed screens are considered redundant, and the computing power and transmission speed lack any sense of experience. The pure electric platform, with more powerful chips and algorithms, can make driving a pleasure.

An apt metaphor is that if a fuel vehicle is likened to a Nokia that can only make calls and send texts, then the current smart electric vehicle can be likened to the first-generation iPhone.

So at that time, converting from fuel to electric was a common practice for most traditional fuel vehicle companies. After all, it takes time and money to develop a pure electric platform architecture from scratch, and launching it in an immature market and technology environment is full of uncertainty. Volkswagen's pure electric Golf, Lavida, and Bora are similar products.

But perhaps Geely was greedy for the last dividends of the fuel vehicle era, or perhaps due to the lack of determination from the management, immature technology, and insufficient consideration of the strategic timing by the company.

Starting from 2020, the Chinese automotive consumer market has almost entirely shifted to newly designed new energy vehicle models, while Geely has not yet established a systematic new energy product system.

As a result, in the face of the "dazzling" Chinese smart car products, consumers are no longer interested in Geely cars.

It is in this context that other domestic car companies, especially leading ones in the new energy field, have seen their revenue and profits continuously rise, while Geely, which has repeatedly "topped" the sales of domestic car companies, has begun its "reverse path."

Inevitably, Geely has finally embarked on the path of transformation.

In 2020, Geely and Volvo announced the all-new SEA architecture and declared that they would invest 180 billion yuan over four years to create this pure electric platform.

It should be noted that in the process of automobile production, it often goes through stages from developing a single model to platform-based production, and then to modular production.

Compared to platform-based production, the advantage of modular production lies in its ability to cover different levels of vehicle models, a higher proportion of parts sharing, and higher production efficiency. However, the prerequisite is that there must be sufficient vehicle sales volume to support it, in order to dilute the substantial research and development costs and longer cycles.

Geely's specific approach is to ensure that as many of its brands as possible can use the SEA architecture, including Lynk & Co, Geometry, Volvo, LEVC, Smart, and others. Additionally, they leverage the technological advantages of the SEA platform and the Ningbo-Hangzhou Bay factory to provide technical support or contract manufacturing services for other brands, including Baidu and Foxconn.

This has once again been jokingly referred to by outsiders as: Geely's product line is even longer than Great Wall's.

Another development is that in 2022, Geely reorganized its two main strategies: firstly, the Geely brand will be based on the all-new "Thor Power" system, similar to BYD, subdividing the hybrid market into "Fuel-efficient" and "Performance" categories; secondly, it will focus on the new energy brand Geometry, emphasizing high-end positioning.

Based on actual consumer feedback in the domestic new energy vehicle market, this does indeed seem to be a good direction. And from the subsequent data, Geely's automotive transformation seems to be on the right track.

According to the financial report, although Geely's penetration rate of new energy vehicles still lags behind the market as a whole — with a penetration rate of 29% for Geely's new energy vehicles in 2023, compared to the national market penetration rate of 31.6%, a difference of more than two percentage points.

However, faced with the automobile price war that lasted throughout 2023, Geely still managed to deliver a decent performance: achieving a revenue of 179.2 billion yuan in 2023, a year-on-year increase of 21%, setting a new historical high; net profit was 4.94 billion yuan, a year-on-year increase of 6%. Achieving a net profit attributable to shareholders of the parent company of 5.31 billion yuan, a year-on-year increase of 0.91%.

Meanwhile, Geely has also proposed to achieve a sales target of 1.9 million vehicles this year, representing a 13% increase from the total sales in 2023. Among them, sales of new energy vehicles are expected to increase by 66% compared to 2023.

In its performance statement, Geely's executives also expressed confidence, stating, "I am very confident now that Geely will return to the top of the independent car companies in the future."

3. "It's Not Always Beneficial to Lean on a Big Tree for Shade"

Let's rewind to 2021 when Geely, with a market value of 300 billion Hong Kong dollars and its bold acquisition of the European luxury brand Volvo, was once hailed as the "top dog" among independent car manufacturers. This was undoubtedly Geely's shining moment.

However, observant individuals have noticed a significant shift in Geely Holdings' development strategy.

Geely's founder, Li Shufu, who had dabbled in real estate speculation in Hainan in the early 1990s and ended up losing everything, famously remarked that he could only engage in real industries.

In 2010, Li Shufu acquired Volvo Cars, and from 2015 to 2018, Geely's sales surged from 510,000 vehicles to 1.5 million vehicles, making it the leading Chinese domestic brand in passenger cars. During this period, Li Shufu never resorted to equity financing.

However, starting from 2020, Li Shufu took an unconventional approach, frequently engaging in capital market operations:

For instance, in 2020, Geely Auto sought dual listings in A-shares and H-shares (which was later withdrawn). In 2021, Volvo Cars was listed in Sweden. In 2022, Lynk & Co and Yiche (EEC) successively went public on Nasdaq through SPACs. In 2023, Xpeng Motors filed for IPO on the New York Stock Exchange, and in 2024, Lotus went public on Nasdaq via SPAC. Companies like Red Radar, Caocao Chuxing, and Xingji Meizu have also been rumored to be preparing for IPOs, while Smart Mobility has initiated fundraising plans.

These various signs suggest that Geely Holdings seems to be in need of capital.

So why is Geely Holdings in such need of capital? It appears that Geely Holdings is attempting to transition from industrial capital to financial capital.

One example is that after Geely's "giant swallowing elephant" acquisition of Volvo and five years of development, Geely Holdings achieved a leap forward. Geely Auto, in less than three years, saw its sales grow from 500,000 to nearly 1.4 million vehicles; Geely Holdings' revenue doubled from 160 billion yuan to 320 billion yuan; the gross profit margin increased from 16% to 22%, and the net profit margin reached a high of nearly 7%.

Objectively speaking, this merger has achieved a "1+1>2" effect, bringing about a qualitative change in the industry and enabling Geely Holding to have the ability to digest and repay the debt from the previous acquisition of Volvo Cars.

It is from this point that the entire Geely Group has continuously replicated the successful "1+1" model of Geely and Volvo Cars, with the ultimate goal of achieving a synergistic effect of "1+1>2" between Geely and various brands.

However, an easily overlooked fact is that the synergistic integration between Geely and Volvo Cars went through a period of 3 to 4 years of precipitation, and the latter itself has a complete industrial layout system, mature brand influence, and market share. The newly acquired targets may not necessarily possess these characteristics, which could lead to a longer period for them to achieve growth.

Looking at the current landscape of the domestic automotive industry in recent years, Geely Holding's approach is both an opportunity and a crisis.

From the perspective of Geely Holding, the industrial system and technological foundation it possesses are the core basis supporting the independent development of each brand company. The development of each brand is similar to a horse race. As long as some brands can successfully emerge, Geely Holding can once again achieve an advancement in scale, and thus be able to once again digest and repay the current round of borrowing and debt.

However, from an investor's perspective, it is difficult to say whether this is a good or bad thing for Geely Auto.

This means that as part of the Geely Holding's territory, Geely Auto carries more of the expectations of the major shareholders. Participating in price wars and launching a more cost-effective product matrix is aimed at expanding sales and increasing cash flow. It is obviously not easy to benefit from the backing of a big tree.

Another example is the establishment of Jikexing in 2021, positioned as Geely Auto's high-end pure electric vehicle brand, jointly invested by Geely Auto and Geely Holding Group, with Li Shufu serving as chairman and An Conghui as CEO.

However, from the beginning of 2023, Geely Auto began to make a series of adjustments to its new energy strategy.

In February of last year, Geely Galaxy was officially launched, with three products being quickly introduced, forming a product layout of pure electric + electric hybrid, sedan + SUV in the new energy market. Subsequently, in April, Geometry, which was parallel to the Geely and Lynk & Co brands, announced a name change to "Geely Geometry," focusing on a mass-market pure electric series.

In addition, two existing new energy vehicle brands, Lynk & Co, launched multiple new energy vehicle models with plug-in hybrid technology in 2023, and Geely's sub-brand Geometry also introduced two new models.

Regardless of the strategic vision and sustainability, during the process of integrating and advancing the new energy sub-brands, due to the massive initial investment and the increasing market competition pressure, Geely Auto's sub-businesses in the new energy market continue to be under pressure. Until today, some brands under Geely Auto, such as Geometry and Lynk & Co, have not achieved self-sufficiency.

Another example is the recent release of the four-seater version of Geometry 009, which is a microcosm of Geely Auto's hesitation in the transformation of new energy vehicles.

In this historical tide, opportunities and challenges are equal. It is really hard to say whether Geely's model will enter the stage of globalization expansion based on comparative advantages in production capacity, or fall into the trap of capital.

But what is certain is that every step Geely takes needs to be cautious, and so does Geely Auto.