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Geely Chairman Li Shufu: from an adventurous newcomer to an industry leader
Globaltimes.cn | July 23, 2013 10:32
By Globaltimes.cn
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If we want to clearly know the history of the development of auto industry in China, we can never underestimate the role played by the private capital. It is the inflow of the private capital that has injected a great deal of vitality into China's auto industry which had long been relatively closed and stagnant. On the road to the revival of China's auto industry, "car maniac" Li Shufu, Chairman of Geely Holding Group has left an indelible mark.

Wu Xiaobo, a noted financial writer who has long studied the operations of different companies, recalled his astonishment when he first learned that Li Shufu was determined to make cars. According to Wu's understanding of the outstanding companies in Jiangsu and Zhejiang provinces, Wanxiang Group Corporation, which had been specializing in automotive components for more than 20 years, was most likely to succeed in auto manufacturing as its board chairman Lu Guanqiu's most cherished dream was to make cars. In a recent interview, Lu again showed his determination, saying that should he not make cars, his son would realize his dream.      

In May, Lu Guanqiu reportedly joined hands with Bob Lutz, former Vice Chairman of GM and leader of VL Automotive, in a bid to buy the American green carmaker Fisker Automotive which was on the verge of bankruptcy. However, the outside haven't heard any following news regarding this matter. In sharp contrast, in June, Li Shufu pitched Volvo cars on the world leading platform—Fortune Global Forum. Besides the title of Chairman of Geely Holding Group, Chairman of Volvo Group could be used to better address Li Shufu. Currently, Volvo's plant in Chengdu has basically stood ready for the domestic production.      

Three years ago, Geely purchased all shares of Sweden car maker Volvo, which attracted much attention from media at home and abroad. Some industry insiders refused to believe that under the leadership of Li Shufu who is known for his assertiveness and adventurism, Geely, with competitiveness only in the low-end market, could successfully transform and integrate with itself the technology and brand of Volvo especially the corporate culture and management mode. Three years later, in a broadcast session hosted by CCTV's Dialogue during the Fortune Global Forum, Li Shufu, as a sponsor of this event (Volvo was an official partner of the 2013 Fortune Global Forum), said breezily and jokingly, "Volvo's interior air quality system provides you with an air quality inside the car as good as that of Northern Europe while the outside is as bad as that of Beijing".     

The marriage of Geely and Volvo didn't turn out to be as bad as the auto industry had expected. Due to the fluctuation of market demand in Europe and America during the first half of this year, the global sales of Volvo went down 5.5 percent year-on-year. However, the performance in China was satisfying with a sales volume jumping by 34 percent to 28,702 units. It was a result Li Shufu wanted as Volvo can  march into the top tier of luxury car market only by gaining a firm footing here in China.

Before the rise of Geely, China has already begun selling cars in batches abroad in the form of completely knocked down (CKD) and witnessed Nanjing Automobile's acquisition of the insolvent British automaker MG Rover. As an unknown private automaker in the global market, Geely made a bold move by fully acquiring Volvo which had already established itself as a luxury carmaker with a great global influence. The high-profile way to march into the global market shocked many competitors who could not but admire Li Shufu's courage.

The acquisition of Volvo marked a milestone in China's private car companies and even in China's whole auto industry, and showed a new height of Li Shufu's personal decision making and boldness. A retrospect of Li Shufu's 16 years in auto industry will find another two measures of his, to some extent, have a positive impact on the auto industry.

Firstly, with a determined mind and giving himself no retreat, Li Shufu edged into then the nearly monopolized industry. As a vanguard, he revitalized the whole industry with private capital. The competitive structure of China's auto industry was severely distorted before 1997 due to a heavy grip by the government. Auto giants like Volkswagen and GM had a quasi-monopoly on China's auto market while the state-owned carmakers were happy to share the fruits, making no attempt to develop their own business. In 1998, a year after the establishment of Geely, Great Wall Industry Corporation—predecessor of Great Wall Motors was transformed into a state-owned stock enterprise instead of a private one, only producing pickup trucks as a means of production. It is against this backdrop where there was no niche in the market that Li Shufu made his mind to make cars.    

In 1999, in order to march into the auto industry, Li Shufu asked the Ministry of Industry and Information Technology (MIIT) and a vice-premier in charge of this matter for permission, saying, "Please give me a chance to fail", which is still ringing in our ears. In fact, the year when Geely stepped into auto industry, Chery Automobile founded with local state-owned capital encountered the rejection from MIIT and finally got the permit only after unconditionally giving Shanghai Automobile Corporation 20 percent of the shares. In such a bad investment environment where there was no policy support, no technological reserve and no market advantages, Li Shufu surmounted all the difficulties and got the permit for Geely in 2001 (Before 2001, China adopted a strict access system in auto industry, according to which, private companies were not allowed to make cars, and those cars produced by unlicensed companies couldn't be registered. BYD Auto only entered the auto industry late in 2003).

Perhaps, we can't go far as to say that the accession of Geely changed the structure of China's auto industry, but the example set by Li Shufu, to a large extent, accelerated the government's decision to grant permit to private capital in the auto industry. Nowadays, home-grown car brands led by Geely and BYD have broken the monopoly of foreign brands. Gone are the days when consumers had to shell out more than 300,000 yuan just to buy a Santana considered out-of-date in foreign countries.  

Secondly, Li Shufu's investment and foresight in education are highly commendable.

In the year 2000, Geely Holding Group founded Beijing Geely University which was ratified by the Beijing People's Municipal Government and entered on roll with the Ministry of Education of the People's Republic of China. It is a private higher vocational college authorized to issue state-recognized diplomas. Situated in the zone of the Changping Sci-tech Park of Zhongguancun, at the north side of the foot of the scenic Western Hills, Beijing Geely University enjoys beautiful and poetic scenery. The campus covers an area of 106 hectares, with a total floor area of nearly 450,000 square meters. It has more than 2000 faculty and administrative staff and accommodates over 15,000 full-time students.

The birth of Beijing Geely University complied with a high demand of talents specializing in cars as China's auto industry was beginning to take off. Back then, the newly established Geely was no match for joint-ventures in all respects. Therefore, hunting for suitable talents was a problem for Geely which really annoyed Li Shufu who would not accept defeat and finally determined to produce their own talents to realize the personnel supply. Before the establishment of Beijing Geely University, some domestic carmaker had created their own personnel training system, none of which is comparable to Li Shufu's strategy of establishing a university.  

The establishment of Beijing Geely University has not only addressed the shortage of front-line technicians but more importantly formed a line of production, learning and research and at the same time serve as a perfect example for the other domestic companies. For a long time, joint-venture companies have been cooperating closely with Chinese universities in teaching, research and development, which has resulted in many excellent fresh college graduates working for them. Judging from no matter a short or long perspective, it is very bad for the development of our domestic auto industry. Although Li Shufu's Beijing Geely University hasn't done well in cultivating high-end talents so far, given more time and successful experience, it could become a cradle in China of high-end auto talents in the future. The University has set their mid- and long-term goals: in 10 years, it shall become the best private university in China, and in 20 years, be among the top 100 universities in China and the most respected private university. As time goes on, these goals will surely be realized.

Nowadays, Geely is slowly marching into the middle and high-end market with its Emgrand cars while Volvo is moving forward in the second and third tier of luxury car market. Chairman Li Shufu has successfully passed his first half of career in auto industry and we sincerely hope the next half would be more exciting and successful for this iconic figure among home-grown brands.


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