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Volvo cars and geely will integrate their engine divisions into a new company

On Oct. 7, Volvo cars announced that Volvo cars and geely planned to integrate their internal combustion engine units and separate them.Aim to be a global supplier of next-generation engines and hybrid powertrains.By splitting off its engine division, Volvo cars will focus on pure electric vehicles (evs) as a luxury brand.Geely will use the internal combustion engine and hybrid powertrain developed by the new Company in vehicles of geely auto, proton, lutz, LEVC (London EV Company) and Lynk & Co(Lynk & Co) brands.The new company will also supply products to companies outside the group and pursue development opportunities.The new company will send about 3,000 people from Volvo cars and about 5,000 from geely's engine division.Including r & d, procurement, manufacturing, IT, financial departments.No layoffs are planned.Details of the new company's business are now being worked out, and the new company will be formed in future after negotiation with the union and approval by the board of directors and relevant authorities.

Coordinated development to a higher level, focus on research and development resources.Compared with the previous joint research and development of modular production platform, it is expected that the integration of engine business will make the two sides more closely connected and the group's internal resources more focused.Volvo cars will focus on research and development of pure electric products, the realization of the whole vehicle electrification, and new business unit will focus on research and development of the engine + hybrid system, provides the hybrid system for Volvo cars, at the same time for geely, proton, road, London electric cars, and led g brands such as engines and hybrid systems.

Open up the platform, and technical endorsement.Since the acquisition of Volvo cars by geely holding in 2010, the resources integration and synergies between the company and Volvo cars have been continuously enhanced.The CMA platform, developed by geely's European r&d center since 2017, is mounted on geely, Lynk & Co and Volvo models.In the future, the two parties will continue to build a number of versatile passenger vehicle platforms. After the two parties plan to merge the engine business, geely's models are expected to be equipped with efficient and leading powertrain and hybrid power system, further enhancing the technical strength and brand power of the company's product series.

The scale advantage is expected to be even greater.According to the company's "blue action" plan, more than 90% of geely's auto products will be hybrid and pure electric new energy vehicles by 2020. Volvo auto plans to sell half of its total sales of pure electric and hybrid vehicles by about 2025.Volvo cars currently produces about 600, 000 engines, and the combined engine business is expected to produce 2 million units a year.Meanwhile, the combined business unit of geely and Volvo cars will become an independent power system supplier, which is expected to be exported in the future.The engine business integration plan will enable the two sides in r & d, production, procurement and operation of the scale effect to be further enhanced.

Profit forecast and investment advice.It is estimated that the company's return net profit in 19-21 years is 94.7/128.9/14.98 billion yuan respectively, and the corresponding PE is 11.7/8.6/7.4 times.In the medium to long term, we are still optimistic about the recovery of the company as an independent leading beneficiary industry and the continuous improvement of competitiveness, and maintain the "buy" rating.

Risk warning: the merger requires the approval of Volvo automobile union, the boards of directors of both parties and the regulatory authorities in both countries, which is uncertain.

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I. deepening cooperation in the technical field after the group's acquisition of Volvo cars

1.1 review of group's acquisition of Volvo cars

In 2010, geely holding group formally completed the acquisition of all shares of Volvo cars. After the completion of the acquisition, geely and Volvo cars carried out effective cooperation in technology.On March 9, 2012, geely holding and Volvo cars signed a memorandum of understanding for technology transfer, and jointly developed strategic projects in the fields of green series engines, small car platform and electric vehicle powertrain system technology.

After acquiring Volvo cars, the group has been absorbing advanced technologies.Borui model on sale in 2015, is a geely holding acquisition of Volvo cars after the launch of the first senior models, it is a completely independent research and development models, but used the technology part of Volvo cars, and Volvo car company was founded in 2017 is a joint venture brand led, its first models brought g 01 listed, the model using CMA architecture for the first time.

CEVT r&d center and CMA structure provide geely with strong technical support.On the one hand, CEVT r&d center is affiliated with geely holding group, in company with Volvo cars, geely automobile, its scope of work covers the geely's future strategic products and various aspects of research and development platform, including sharing framework, chassis, powertrain, transmission system, and on the car body and appearance design, vehicle purchase, quality are also included in this management and marketing of new products, etc.CMA architecture is, on the other hand, developed jointly by Volvo cars and geely modular architecture, investment scale is about 20 billion yuan, for geely and Volvo cars will be the next generation of intermediate car modular architecture system, and satisfy the Volvo cars and geely automobile multiple demand compact products in the future, in order to achieve the greatest degree between Volvo cars and geely platform sharing, including future Volvo XC40 products will come from the platform.The basic module architecture of CMA intermediate vehicle has given Lynk & Co the ability to develop from A0 to b-class vehicles. In addition, the latest powertrain technology, electrification technology and autonomous driving technology of Volvo cars will be gradually introduced into the product research and development of Lynk & Co.

The engines jointly developed by geely and Volvo are gradually being widely used within the group.The Lynk & Co's first car on the market, Lynk & Co 01, is directly equipped with the Volvo engine of the model B4204T30, while the 1.5t three-cylinder engine of the Lynk & Co 02 is jointly developed by geely and Volvo.Subsequently, the modified 1.5t engine and geely's self-produced 2.0t engine were gradually promoted in the geely brand, respectively mounted on jiaji and xingyue, while the new 1.0t engine began to be equipped on Bin Yue and Bin Rui.In the future, Volvo series engines are expected to be applied in many geely models and become the power system promoted by the group.

1.2 sales summary of geely holding group in 2019

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The group's major brands geely, Lynk & Co, Volvo and proton achieved a total sales volume of 1,036,000 units in the first half of 2019, down 7% year-on-year.In addition, the other three brands all achieved positive growth, among which proton brand had the highest growth rate, reaching 61%.After the integration of engine business, its annual production capacity is expected to increase by more than 2 times, and the scale effect can be reflected.

Second, the company and Volvo car engine business strong combination

2.1 summary of geely engine industry layout

Geely's engine products cover naturally aspirated and turbocharged engines from 1.0-2.4l, covering the geely brand and the Lynk & Co brand.Among them, the 1.00-displacement naturally aspirated, turbocharged and 1.5-displacement turbocharged engines are three-cylinder products, while the rest are all four-cylinder engines.Among them, jlh-3g15td series engine with displacement of 1.5t and jlh-4g20td with displacement of 2.0t are both carried by geely brand and Lynk & Co brand.

Since its establishment, the company has adhered to independent research and development in the core system of power system. The history of engine product research and development can be divided into three stages:

1) first generation engines from "0" to "1".The company's first 1.3l engine, the MR479Q, was launched in 2003 and was loaded into the car in May 2005.

2) technological breakthroughs, leading the independent engine industry.In August 2006, geely officially launched China's first CVVT engine, the JL4G18.This engine, with excellent technical reliability and performance, has spawned several subsequent models, and has been geely's main engine for quite a long time.

3) absorb Volvo car technology and develop industry-leading products.The 1.0TD and 1.5TD engines jointly developed by geely and Volvo cars and the 2.0TD engine power system led by Volvo cars are in the leading position in China in such fields as high-pressure direct injection, VVT, turbocharging and efficient lubrication.

Geely power manufacturing production bases are distributed in 9 places in 5 provinces in China, with a total of 8 mass production bases and 3 large-scale industrialization projects.The yiwu base established in 2014 has a total investment of 7.5 billion yuan, covering two independent production lines with an annual planned capacity of 400,000 units for 1.0td and 1.5td, and a mixed production line with an annual planned capacity of 400,000 units for 2.0td and 1.5td, with a total planned annual capacity of 1.2 million units.

Yiwu base mainly produces three new generation engines of 1.0td, 1.5td and 2.0td. The factory manufacturing process is fully adopted the VOLVO factory standard, which is the core link of geely's third generation power system planning. The products will be applied to geely brand cars at the same time, and also loaded on many models of Lynk & Co, VOLVO and other brands.

In the future, geely will also build a modern engine factory in taizhou and guiyang respectively, and the completed yiwu and baoji bases constitute the cornerstone of geely 3.0 zhiqing.

2.2 Volvo cars is a leading manufacturer in the global engine industry

As one of the earliest automobile manufacturers in the world to use turbine technology, Volvo cars launched powertrain drive-e Powertrains in 2014, named "e-drive intelligent technology" in Chinese.The powertrain consists of eight engines in two series (gasoline/diesel). The 2.0t drive-et5 was named ward's top 10 global engines in 2015, while the drive-et6 has a maximum power of 320 horsepower, which it retained in 2016.

The drive-e series of engines combines innovative features of intelligence and electrification.The goal of drive-e is to meet increasingly stringent global carbon dioxide emissions standards with a mix of lightweight and electrification.Thanks to its small, lightweight and compact design, the drive-e engine weighs up to 50kg less than the current average engine and has a significantly improved fuel economy.The drive-e Engine platform was ready for electrification from the start, and the "Twin Engine e-drive hybrid" power technology allows the drive-e Engine to be matched with efficient electric motors.

In 2016, the Volvo automobile engine factory built in zhangjiakou invested 3.25 billion yuan to build a capacity of 325,000 units, which is the second engine factory of Volvo automobile in the world.The other is an engine plant in Skovde, Sweden, which was established in 1975 and has a capacity of 450, 000 engines.

 

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2019/10/09 14:27
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