Geely Acquired Volvo, Then Messed It Up—15 Years Later, Both Are Finished

0:03 When it comes to buying a Chinese-made car, you really need to think twice. Take my Ghily Shin Rui for example. I've driven it for 43,000 km, and the engine keeps triggering warning lights. This year alone, I've already taken it for repairs three times. The 4S dealership said it might be a problem with the fuel system, and even the ignition system broke once. There are just too many issues. Every time I go to Gily's service center, it's a complete mess. There's so many cars waiting to be fixed. There's no space to even park. Honestly, the staff there are very polite and helpful, but they just can't fix a car properly, and it makes me feel awkward. Today, there are too many vehicles, and the shop wouldn't even accept mine. They told me to go to another garage across the street. That's

0:50 why I'm telling you, be cautious when buying a domestic car. Just look at how many people are lined up for repairs, and there's not enough staff. With no repair slots available, I had no choice but to go somewhere else. It's such a headache. >> Guys, the Gil Galaxy L that you've been asking about, I finally got my hands on one today. Let's take a close look at how this car is actually built. This one got into an accident in the front so you can see what's inside. Check out this bumper reinforcement beam. It's just a thin layer of metal. Some Japanese brands made in China even include a layer of foam inside. But this one, nothing. Not even foam. Honestly, this car just can't compete with joint venture models. Even the cheapest foreign brands come with pedestrian safety features to prevent people from

1:37 getting dragged under. Gily hypes up their cars like crazy. But once you take them apart, it's all disappointing. It's clear they've turned cutting costs into an art form. Gili Auto formed in 1997 was the first privately owned car manufacturer in China. It went public on the Hong Kong stock exchange in 2004. In 2010, Giley made headlines by fully acquiring Volvo cars through a major deal. Since then, it has also taken stakes in Mercedes-Benz Group and AB Volvo, building a global brand portfolio. Today, Giley is considered the most internationally oriented Chinese private car maker. That Volvo deal was a turning point that launched Giley into rapid growth. Behind the scenes, the acquisition had strong backing from the Chinese government, especially from the then vice president

2:24 Xi Jinping. But by May this year, Volvo began laying off a large number of employees in China. The cuts affected key departments like engineering and supply chain. In the first quarter of 2025, Volvo's global operating profit dropped sharply, down more than 70% year-on-year to just 1.9 billion Swedish crona. Currently, Volvo employs about 43,500 people worldwide. The planned layoffs affect around 3,000 positions or roughly 7% of the workforce. In China, the impact varies by department, ranging from 10% to as high as 70%. The hardest hit has been the R&D department, especially at Volvo's Jading Tech Center in Shanghai, which is the company's main research hub in China. On the sales front, Volvo has also struggled in China. In 2024, their total sales in the

3:12 Chinese market dropped to 156,400 vehicles, an 8% decline from the previous year and the lowest in the past 5 years. In the first quarter of 2025, sales slipped further to just 33,300 vehicles, down 12% yearonear. That's a sharper drop than the global average of 8%. As a representative of second tier luxury cars in Northern Europe, Volvo was once renowned worldwide for its safety and environmental credentials. However, its recent sales slump in the Chinese market indicates a serious challenge to its future profitability and market share. In fact, the potential financial crisis for the company has already started to show signs. Before Giley fully acquired Volvo Cars, the Chinese automotive industry, especially car manufacturing, was dominated by state-owned and joint venture companies.

3:58 For joint ventures, the Chinese side typically held a 51% stake, a model that had become an accepted standard by the government at that time. Under China's current communist regime, private enterprises have always been secondary, especially in capital and technology intensive industries like car manufacturing. However, Giley as China's first privatelyowned car manufacturer was able to gain full support from the Chinese government when it acquired Volvo, making this acquisition quite exceptional. The main reasons likely include number one, at the time, despite the establishment of several joint ventures, mainly with state-owned enterprises such as SIC General Motors in Shanghai, FAW Volkswagen in Chongchun, and Dongfong Citroron in Wuhan. Most operations focused on

4:43 domestic low-end manufacturing and assembly. Core technologies like vehicle design, ABS, and automatic transmissions were still controlled by foreign companies. While the Chinese automotive industry had long been seeking technological breakthroughs, having state-owned enterprises involved would have been too overt and ambitious, Giley's involvement as a private company offered a much subtler, perhaps deceptive approach. Number two, due to the capital and technology intensive nature of car manufacturing, the industry was once seen as a forbidden zone for private enterprises in China. Gilly founder Lehu Fu as a later entrant into this field lacked competitive advantages in areas such as funding, technology, branding, and traditional manufacturing. For him to improve, acquiring Volvo was the best choice as it helped fill the gaps in these areas

5:29 and positioned Gilly at the forefront of Chinese car makers. Additionally, through joint ventures, private enterprises could not only benefit from the Chinese government's favorable policies, but also gain extra protection in the business environment. Three, private enterprises, especially large ones, have always faced survival threats in China unless they are under the protection of the powerful Chinese Communist Party. Liu Fu, the head of Gilly Group, surely understood this. As a businessman, he had to be savvy in managing relationships. Not only did he maintain good relations with the local CCP officials, but he also had ties with General Secretary Xi Jinping, the highest ranking member of the CCP. A related report from the New York Times published on January 24th, 2011 noted that Xi Jinping had visited Giley in 2002 when he was the Communist Party

6:16 secretary of Jang Province. At the time, she remarked, "If we don't strongly support companies like Giley, who else should we support in reality, Liu Fu's company received support from the Chinese state-owned funds from the very beginning?" Later, when the Chinese government significantly tightened its policy on overseas acquisitions, Giley went against the trend. Not only did it acquire Volvo cars for $1.8 billion US, but it also secured $9.2 billion US in financing with backing from state-owned financial institutions. Furthermore, Gilly invested in the famous German car maker Daimler Group, becoming one of its largest shareholders. Chinese state media also provided extensive positive coverage of Lieuf's actions. Some Chinese netisonens noticed that Liu Fu's wife shares the same name as Xi Jinping's sister-in-law, Pong Lean. This

7:03 led many to believe that Lie Shu Fu's strong support was due to family connections. While the authenticity of such rumors is hard to verify, various signs suggest that the relationship between Xi Jinping and Lie Shu Fu is more than just professional. In 2010, the signing ceremony for Gily's acquisition of Volvo took place during Xi Jinping's visit to Sweden. At the time, he was vice president. However, she did not attend the ceremony as many had expected. The Hong Kong newspaper Mingpa commented that she's absence was to avoid any appearance of conflict of interest. In 2014, during his visit to Belgium, she made a special trip to visit Keley owned Volvo's factory in the area with Li Shu Fu accompanying him. In 2015, when she visited the UK, he also toured the new generation of London

7:48 taxis, a product of the British company acquired by Lieufu. As a privately owned enterprise, Giley's acquisition of Volvo received full support from the Chinese government. But what did the government gain in return? On a macro level, for foreign acquisitions or investments by Chinese companies, the Chinese government has developed a set of strategies to handle them. These strategies can be summarized as nurture, trap, and kill. The Chinese government uses different approaches in these three stages to deal with foreign businesses. In the nurture stage, the government allows foreign enterprises to make profits in China, but encourages technology transfer, local collaboration, and vertical integration through policy designs. This aims to achieve the goals of using foreign companies to boost domestic industries and using external support to drive internal growth. In the trap stage, the

8:34 government lures foreign companies into the market through various incentives like tax cuts, land subsidies, market access, and easier financing. In the kill stage, the government begins to strengthen support for domestic companies. It offers subsidies, regulatory restrictions, and market-driven policies to gradually limit the development space for foreign businesses, ensuring that Chinese brands dominate key strategic industries. Tesla's factory in Shanghai is the latest example of the nurture, trap, and kill strategy being applied in the automotive industry. In 2019, when Tesla began building its first overseas gigafactory in Shanghai, the Chinese government rolled out the red carpet, offering favorable conditions like a 1.4 billion US lowinterest loan. The media praised the move, claiming it would ignite China's electric vehicle

9:20 industry. However, just 6 years later, Tesla's market share in China's EV sector has dropped from 20% in 2020 to just 12% in 2024. By May 2025, Tesla's sales of locally produced EVs in China had decreased by 15% compared to the previous year, marking an eighth consecutive month of decline. This shift reflects Chinese consumers preference for cheaper domestic brands like BYD and Gily. Tesla's struggle is a result of the Chinese government's nurture, trap, kill strategy. First, attract foreign companies to set up factories with cheap production and a fast market like Tesla's Shanghai Gigafactory. Then, through joint ventures, technology transfers, and even espionage, key technologies are passed on to Chinese companies like battery supplier CL and EV maker BYD. Finally, using policy

10:07 support and lowcost advantages, China pushes foreign companies out of the market while simultaneously expanding its own global market share. The nurture trap kill strategy aims to support domestic companies, allowing them to continuously take market share from foreign firms both in China and globally. It has also led to the weakening of the competitive edge of industry leaders like Tesla. Tesla's downturn reflects a shift in Chinese consumers preferences toward domestic brands, which though of rougher quality, offer much cheaper prices. Looking back, local companies like Giley and BYD are direct beneficiaries of the Chinese government's long-term nurture trap kill strategy. Giley strengthened its product research and manufacturing capabilities by acquiring Volvo cars and setting up a joint R&D center in Sweden. This move was especially impactful in the fields

10:54 of EVs, intelligent systems, and platform development. The China Europe Vehicle Technology Center CEVT jointly established by Gile and Volvo in Goenberg, Sweden, is the core platform for their technological cooperation. Their R&D achievements include modular platforms, electrification, and intelligent technology, all of which provide Gily with core competitiveness in EVs. CEVT's modular platforms include compact modular architecture used for medium-siz vehicles supporting models like Link and Co. 01 through 08. Gily Galaxy L7, Zeer X and Proton EMAS 7. Scalable product architecture 2 used for high-end models like the Volvo EX90 and Zeker 001 compatible with both pure

11:39 electric and hybrid systems and supporting 800VT architecture. By 2025, CEVT has filed over 3,000 patents covering platform design, battery integration, and electronic control systems. CEVT's CMA and SPA2 platforms have helped Guey, Zeer, and Lincoln code save about 30% on R&D costs while shortening the development cycle of each model to 18 to 24 months compared to the industry average of 36 months. For example, the R&D cost for the Gily Galaxy E5 based on the CMA platform was reduced by around 500 million R&B. With CEVT's patent licenses, Gily has been able to quickly launch highc cost performance EVs, directly squeezing Tesla's market share in China. Tesla's Model 3 and Model Y

12:26 prices can't compete with Achille Galaxy or Zeer models, causing Tesla's market share to drop from 15 to 20% in 2020 to just 7 to 10% this year. The patent licenses also allowed Giley to bypass developing its own battery management and intelligent driving technology, instead using CEVT's results. By 2025, Giley is expected to save more than 2 billion R&B in research and development costs. Additionally, Giley has used CEVT's modular platforms to develop alternative models like Zeer and Lincoln Co., further pushing down Volvo's market share in China. Volvo sales in China were only 156,400 units in 2024 and 8% year-on-year decline. In the first quarter of this year, the decline was even steeper, dropping by 12%. This is the true reason behind Volvo's continued

13:13 sales collapse in China. The layoffs at Volvo China are likely just the beginning. The latest statistics show that in 2024, Giley Holding Group's global sales exceeded 3.33 million vehicles with Giley Auto, including Giley, Galaxy, Lincoln Co., and Seeker, reaching over 2.1 million units, a 32% year-on-year increase. The sales of EVs reached 888,200 units, growing by 92%. In the first half of 2025, Agiley's vehicle sales reached 956,000 units, a 41% year-on-year increase with EVs accounting for over 320,000 units, or 33.5% of total sales. In 2024, Giley Autos revenue 240 billion

13:59 R&B, about 35 billion US, a 34% year-on-year increase. In the first quarter of 2025, revenue was 72.5 billion R&B, up 25% year-onear. In 2024, Giley Autos exports reached 270,000 units, a 70% year-on-year increase. From January to April 2025, exports of EVs reached 642,000 units, a 52.6% year-on-year increase. The Chinese government's nurture trap kill strategy is becoming a reality. However, reducing costs cannot be at the expense of products quality and performance. It is neither limitless nor all powerful. Behind these impressive statistics, there lies another more troubling reality. >> There's been a news story lately about

14:47 Giley pulling out of the Russian market. Pulling out of the Russian market. This feels like it goes against the current trend of Chinese companies expanding abroad. But honestly, I think this has been brewing for quite some time. This year, China's car exports to Russia dropped by 49% compared to last year, ending the rapid growth seen in previous years. Since 2021, Chinese car exports to Russia grew 20 times over the course of four years. Except for the Russian domestic brand Lada, the top 10 bestselling car brands in Russia were all Chinese. Haval, Cherry, Gili, Chongan, and others leading the charge. For the past few years, Chinese car makers have been raking in profits in

15:33 the Russian market. However, the market has now become saturated, and Chinese car exports to Russia have started to decline. The main reasons include the Russian government tightening its import and export policies for Chinese cars, such as imposing a 55% tariff on car parts and other hardware, fierce competition among Chinese car makers in Russia, and quality and reputation issues among Russian consumers regarding Chinese cars. For example, during Russia's harsh winter, 24% of consumers complained that the paint on Chinese cars was too thin, lack corrosion resistance, and didn't compare to European vehicles. Some cars even showed clear rust after just 2 years of use, reflecting cost cutting measures or issues with the cars adapting to local conditions. These

16:18 factors have damaged the image of Chinese cars in Russia. Apart from Russia, both the United States and the European Union have also implemented counter measures. The US has raised the import tariff on Chinese electric vehicles from 25% to 100%. Effective September 27th, 2024. This applies to both whole vehicles and certain parts like lithium batteries. This move is based on section 301 of the 1974 trade act and aims to curb China's unfair trade practices. The European Union has officially approved a counterveailing duty of up to 45.3% on Chinese electric vehicles, including a 10% standard import tariff effective October 2024. These tariffs are set at different rates for various Chinese manufacturers, 17%

17:07 for BYD, 18.8% 8% for Giley, 35.3% for SIC and 7.8% for Chinese-built Tesla. It is likely that more countries will adopt these kinds of countermeasures in the near future. [Music]