Trying to explain the situations at Volvo, Zeekr and Geely
Taking billions in financial hits and going private. What is going on?
Before I’m starting today’s newsletter, I have to admit I’m part of the problem. By that I mean that I was one of the car reviewers that liked the Volvo EX90, but couldn’t recommend it due to its faults in software. So I’m partly to blame for the 1 billion hit Volvo decided to take today. I’m sorry to all the Volvo fans. Hate mail will be ignored and deleted.
So to go into the issue at hand: Volvo let the world know it is taking a 11.4 billion SEK (about 1 billion euro) impairment charge into the accounts. It’s partly blaming the orange guy and his insane idea’s and import tariffs and partly blaming the delay and the subpar launch of the EX90 flagship EV SUV.
What does that mean? Nothing much actually. Accountants at the company are just rectifying the books with the charge. It’s kind of an admittance of not being able to meet expectations and therefore not being able to justify the investments it made to get the EX90 to market. It’s just a way to keep the books and outlooks for investors more truthful.
In other words: ignore the sensationalists headlines of Volvo begin in deep deep trouble because of the EX90. It’s just admitting it won’t make as much money on that (and other investments) as it thought it would.
Zeekr, on of the other car companies Chinese big boy Geely also owns besides Volvo, is going through a confusing time. After a pretty successful IPO in New York in May of 2024, the parent company is taking the car brand private. Owners of shares will receive a small premium or can opt to take shares in Geely as compensation.
The move seems to be linked to the same orange American that Volvo blamed. By taking Zeekr private, Geely seems to be trying to get out of intense regulatory oversight and investigations by Trumps administration. It also lowers risk for geopolitical problems.
But that is not what Geely is saying. The company is telling everyone that it’s strategic move with which it will be able to reduce overhead costs like R&D, procurement and marketing, and increase innovation and production at the same time. Which mostly seems relevant to the insane pressure Zeekr faces on the Chinese domestic market, on which the Chinese government is encouraging consolidation of EV-companies.
On the other hand, having no investors who have a say in how the company is being operated, gives Geely full control over the future of Zeekr. That means Geely can restructure, invest, and reposition the brand without the short-term pressure of public markets or the risk of negative investor sentiment.
Geely must be having something big planned for Zeekr, because it’s having to shell out 2.2 to 2.4 billion dollar to buy back the outstanding shares. But it seems to be quite cheap. Shareholders are already on the barricades saying the Chinese company is trying to lowball them with the offer of around 26 bucks a share. They think Zeekr’s valuation is way too low in reference to other players like Xpeng and BYD. Even if sales numbers have been slipping slightly over the last period.
That is objectively funny, because investors complaining about not getting making enough profit on their shares is a reason why Geely is pulling Zeekr out.
In other news
Max Verstappen is still at Red Bull and Mercedes still hasn’t confirmed Russell’s contract.
Lucid is claiming a big chunk of the news cycle today. The Lucid Air is the best selling luxury car in the US, which - I have to say - is very well deserved. But I’m kind of a fan of the brand. But still I’m being a bit sceptic about Lucid unlocking ‘handsfree driving’ for the Air and planning an update for the Gravity. There is also kind of sad news: Lucid’s will get more expensive because of the orange mans tariffs.
That orange man is really putting his mark on things today. You’d almost think he’s hiding something else. But in this case his influence also hits the Tesla launch in India. Elon Musk was forced to price the first models at such an insane mark-up, making buying a Tesla Model Y even an harder sell than it already is. A Model Y costs between 61.000 euro and 69.000 euro without the self-driving option, or about 15.000 euro more than European prices.
Even more insane than the orange American, are the guys at Lanzante, in a positive way. They took my personal favorite Lambo ever: the 999 kg weighing, V10-powered Sesto Elemento, and made it road legal and took it to Goodwood.