Life After Ford: Volvo Turnaround Gains Speed Under Chinese Billionaire Owner
Li Shufu made his first cars when he was not even 10 years old–crafting models from the sand near his family home in Taizhou, along the East China Sea. His designs, he recalls, were inspired by the Red Flag cars that drove out of a nearby military airport–the only make China had during its Maoist
heyday. “We lived in a farm village, and no one could afford to buy a car or to fly,” he says. “We were envious. We couldn’t afford any toys. I couldn’t imagine making a real car.”
China’s current era has awakened many imaginations. Li is rare among today’s many Chinese entrepreneurs for taking on auto manufacturing, a sector dominated by state enterprises and multinationals. Auto parts and auto sales have been better turf for entrepreneurs. But Li’s Geely Automobile Holdings has thrived as China has surpassed the U.S. to become the world’s largest motor vehicle market. Geely sold a record 549,468 cars last year, generating record sales of $4.7 billion and profit of $423 million.
Things have turned tougher, however. China’s auto industry growth is slowing down. In August sales rose by only 3% from a year earlier. Domestic makers like Li are facing an onslaught of new models from global rivals such as GM and Ford and their China joint venture partners. Global markets such as Russia and the Middle East–where Geely does business–are wobbly, too. The wealth of Wei Jianjun, chairman of rival Great Wall Motors, is down by a third from last year. Geely’s Hong Kong-listed stock has declined 20% in the past year amid a 27% decline in sales in the first nine months of the year. (Click here for a list of China’s 15 richest auto industry entrepreneurs.)
credit:Eric Leleu For Forbes
“No matter how hard we work, there is always a gap with Western brands,” Li bluntly told FORBES ASIA in an interview at his headquarters in Hangzhou. That’s borne out in figures for the market share of domestic-brand sedans: It has plunged by a third since the end of last year, amid a wave of new import models from foreigners. Li says he’s not done buying. “I hope to buy brands and businesses globally,” he says. (Back in 2006 he got 20% of London’s symbolic black cabs maker Manganese Bronze. He added the rest last year; it is now called Geely UK.)
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Thirty-year
industry veteran Lars Danielson seems to represent part of the payoff
that Li is looking for. The head of Volvo’s China operations moved there
after running Volvo’s main plant in Sweden for five years. Rather than
leave when his first three-year contract ended, he stayed on.In rising from a simple life as China was in the early days of its reopening to the world, Li took a while to find his true mark. He bought a camera with money from his family and eventually had a small photography studio. But he turned to scrap metal for a better payday. That business led him to start making parts for refrigerators–then a badge of consumer arrival–and later complete fridges sold under the “Arctic Flower” brand. Some college followed, then a foray into home-building materials.
Li’s sand-model fantasy did not leave him, however, and it was in 1991 that he bought his first car, a “Zhonghua Sedan” with a fiberglass body, steel wheels and little comfort. Government officials mocked the idea of Li making his own cars, so he thought smaller, instead churning out scooters at less than half the cost of Japanese models and exporting them to 22 countries.
source - forbe.com
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