Just 12 years after it made its first car, Geely has bought Volvo from Ford Motor for $1.8bn. The purchase by the Chinese carmaker – whose name means “lucky” – is a defining moment for the group and highlights both the eastwards drift of the car industry and how Chinese companies are extending their reach. There is much to like about the deal, but Geely will need more than luck to make it work.
Running any car company requires great managerial skills. Automakers must build highly sophisticated products, anticipating consumer tastes for years ahead in a brutally competitive arena. They must also deal with a variety of demanding regulators and cope with volatile currencies and commodities.
In this instance, Geely has the particular challenge of taking on a brand synonymous with safety and quality, when quality scandals have tainted Chinese industry's reputation. Volvo's biggest market – the US – is home to some of the world's most discerning premium car buyers. It will require an approach that combines extracting the maximum value in areas such as sharing of parts and technology, with extracting the best out of incumbent management.