Who does Geely want to sell ＂Galaxy＂ to？

In the automotive industry, there is a business strategy called "having more children makes it easier to fight."

At most, such as Volkswagen, which owns seven passenger car brands: Volkswagen, Skoda, Jetta, Audi, Porsche, Bentley and Lamborghini. Traditional car companies hope to achieve crowd refinement, expand price bands and increase premiums in this way.

One trivia is that the car company with the most passenger car brands in the world today is not Volkswagen, but Geely. There are eight brands under Geely, Geometry, Lynk & Co, Proton, Extreme Krypton, Lotus, Volvo and Polaris.

This imitation business strategy is the result of Geely’s capital transfer over the past ten years.

But in the generational transformation of vehicle electrification and intelligence, "having more children and fighting" no longer seems to be the only effective way to sign. Tesla and BYD both use a single brand to achieve their leading position in the new energy market.

In contrast, Geely will sell 329,000 new energy vehicles in 2022, a quarter of Tesla’s and a sixth of BYD’s.

Of course, only two years have passed since the outbreak of the new energy market, and the current sales data cannot anticipate the future of a car company. In fact, Geely still maintains a certain sales growth rate and technical reserves. But more general voices believe that Geely, which is good at capital operation, may be too slow.

In 2022, although Geely’s new energy vehicle sales increased by three times compared with the previous year, the penetration rate was still only 23%, lower than 27% of the industry market.

Even critics place the blame on the strategy of "having more children and fighting", arguing that Geely has too many brands to focus on, and has invested in many companies but cannot provide synergies for new energy products.

But the launch of the Galaxy series on February 23 meant that Geely did not concede to criticism.

Sell the car for a higher price

For Geely, the only drawback of new energy may be the failure to achieve leapfrog growth through asset acquisitions.

In the era of fuel vehicles, Geely achieved triple rewards in terms of brand, technology and finance through the acquisition of Volvo, such as the birth of Lynk & Co and the vast SEA architecture jointly developed with Volvo, which helped Geely smoothly move up the price band of fuel vehicles.

But the new energy market did not give Geely such an opportunity, so that after BYD completed its conquest of the new energy market, Geely could only follow suit, trying to ensure that it did not fall behind, rather than waiting for an opportunity to overtake.

In 2021, Geely’s bicycle price, which has been stable for many years, finally rose. By last year, it was close to the 100,000 mark. It seems that it is only a matter of time to break through. But in the same period, BYD has raised the price of bicycles to 190,000 by selling new energy vehicles.

The failure of the first Blue Geely operation was attributed to the immature external environment of historical timing and strategic conditions, but in fact Geely missed the best window for the development of new energy.

Wang Chuanfu has a point of view on new energy vehicles. He believes that the first half is electrification and the second half is intelligence. The new "two blue Geely action plans" proposed by Li Shufu in 2021 actually put the first and second halves together:

1. Mainly focus on energy-saving and new energy vehicles.

2. Develop pure electric smart vehicles and create a new brand of pure electric vehicles.

After that, Geely began to fundamentally change its new energy strategy.

First launched the polar krypton, into the high-end new energy market above 300,000, and then through the maple leaf transform rui blue set foot in the power exchange market, and tried to make geometry into a new energy brand, while in the technical route layout plug-in, oil and electricity, pure electricity, power exchange, extended range and so on.

And the geometric representation can be called a 180-degree transformation.

In 2020 and 2021, the total number of geometric sales was only 39,300, which is a typical high-drive low-go, and even half of them were digested by Geely’s internal travel platform and flowed to the online car-hailing market.

But in 2022, Geometry suddenly broke out, and the annual shipment reached 149,000 vehicles. Geometry A/C became the main sales force, and two new products were launched: the new G6 and M6 equipped with Hongmeng cockpit.

However, in 2023, geometric sales will decline rapidly, and even the monthly sales of the new G6 and M6 are only 50 units.

Looking at it now, the fatal injury of geometry is not the oil-to-electricity conversion that the outside world says. As a transitional technology, oil-to-electricity is indeed at a disadvantage in the face of pure electric architecture, but influenced by price and policy, rational consumption of oil-to-electricity is not useless, which can be seen from the hot sales of geometry A/C last year.

The real problem with geometry is the confusion of positioning, and further, Geely’s strategic swing in the new energy market.

In the price range of 39,900-189,800 yuan, Geometry has 6 products on sale, covering the market of minicars, small cars and compact SUVs. In fact, Geometry has also launched a small car EX3 Kung Fu cow before, but it was discontinued after only three months, and consumers are still protecting their rights.

For a pure electric brand that focuses on the mid-to-high-end market, such a product configuration cannot convince consumers to buy at a premium. And Geely’s strategic swing is also reflected in the arrangement of internal brands.

After the Galaxy, Geometry will be dominated by the sub-150,000 market, which is equivalent to putting a spell on the Geometry G6 and M6, which are either reduced in price or discontinued. If you look at the sales volume, it seems that Geely does not plan to sell too much.

The Galaxy series, which was rumored to have been finalized by Geely a month before its release, was rather hasty.

But relative to the geometry brand, the Galaxy series positioning is relatively clearer, the first new car 200,000 starting price basically locked down the possibility of price. The product is also a new technology, hybrid for Thor, pure electricity is based on the vast architecture, and geometry is simply the difference between the son and the son.

After completing the basic layout of the new energy market, what awaits Geely next is the market test.

Galaxy L7 has no surprises

In 2022, although Geely has made a breakthrough in the new energy market, the sales gap between BYD and Tesla is still relatively large, and accelerating the transformation has become a thing that Geely itself and the outside world are looking forward to.

To this end, Geely set a sales target of 1.65 million vehicles for the whole year, among which new energy should achieve double growth.

The good news is that in the price range of 20-300,000 yuan, there is still a large incremental space for new energy vehicle sales, and the penetration rate of independent brands is low. Geely is expected to usher in an increase in the share of new energy vehicles as a breakthrough point.

In addition, the emergence of the Galaxy series also has the opportunity to become a replacement brand for Geely’s existing customers in the mid-to-low-end market.

Such as Emgrand and Boyue flagship models with good market reputation, the original customers themselves have the demand for replacement and upgrading, and Geely has a new product line to meet the demand for consumption upgrading.

But the debut model of Geely Galaxy L7 on the 23rd did not offer many surprises.

Although Geely’s official statement is to use a new design language, the car blogger still gave this evaluation after the experience:

The profile photo of the Galaxy L7 cannot be said to have nothing to do with the Boyue L, only that it is exactly the same.

The size and wheelbase of the two models are also similar, and some netizens pointed out that the Galaxy L7 is the HiP version of the Boyue L, with a different interior.

The design style of the Galaxy L7 is still unknown, but what ultimately determines its success lies in more critical performance and technology, such as the power, intelligence, and safety that were highlighted at the launch.

These will take time to be validated by the market and consumers. The current question is: Why is the first model of the Galaxy series electric?

Even according to Geely’s official information, the main selling model in 2022 should be the electric hybrid L series. Although the pure electric E series will launch three products, the first product, E8, will not be delivered until the fourth quarter of this year.

The answer is not surprising, after all, Geely also lacks popular models in the hybrid market.

Several of Thor’s leading hybrids – the Starry L Thor Hi F, the Starry L Extended Range Electric Edition and the Emgrand L Hi-P – have fallen short of expectations, with the top-selling hybrid, the Lynk & Co 09 EM-P, selling just 1,119 units in December.

In comparison, BYD’s cumulative sales of plug-in hybrid models reached 946,000 last year, an increase of 246.7% year-on-year.

And, compared to the pure electric market, Geely has a better brand and technology accumulation in the hybrid market. There are also some voices speculating that Geely’s new energy strategy may need to change again.

On February 7 this year, Li Xiang mentioned on social media that BYD, Great Wall and Geely were using extended-range electric vehicles. However, the Geely Galaxy L7 had not been launched at that time, and Li Xiang’s basis should be last year’s Xingyue L extended-range electric version.

In fact, Geely’s recent marketing trend has begun to shift towards extended-range electric, eventually choosing the relatively new but vague definition of "electric hybrid".

And according to Geely, new energy vehicles are difficult to sell with fuel vehicles, which will also pose a great challenge to the sales team. Geely Automobile has reorganized its internal organizational structure and divided it into Jixing Division, Galaxy New Energy Division, and Geometry Pure Electric Brand Division, which focus on fuel vehicle sales.

In fact, Geely’s reform of channels began last year. However, after the launch of the Galaxy series, Geely made up its mind to solve the problem of price overlap and left-right interaction caused by the same store sales of fuel vehicles and new energy vehicles at the end point.

According to the data, Geely’s channel reform will be rolled out in March, and 300 + independent channels will cooperate when new products are launched in May/June.

Geely dare not take risks

For Geely, the new energy market may enter a price war era, which is not good news.

Although there has been a significant reduction in raw material costs, supply chain costs, and economies of scale, competitors’ business strategies may be encroaching on this part of the effort.

Geely’s pure electric models are now barely popular Geometry and Extreme Krypton. Geometry sold 149,000 vehicles last year, and Extreme Krypton delivered 72,000 vehicles throughout the year with a single model, Extreme Krypton 001. In January this year, Geometry and Extreme Krypton sold 5,825 and 3,116 vehicles respectively, accounting for 81.05% of Geely’s total sales of new energy vehicles.

Now that the Galaxy series is released, the fate of Geometry has been determined, mainly targeting the pure electric market below 150,000. Considering Geely’s overall gross profit level, Geometry is unlikely to wait for the vast structure of SEA, and the future will be based on low-cost small cars or mini cars.

This may be another reason why the first model of the Galaxy series is not purely electric.

In the pure electric market, 20-300,000 price range, Geely to face the opponent is BYD Han, Tesla Model 3. And in the hybrid market, with the Galaxy L7 is BYD Song PLUS DM-i.

This also indirectly shows that Geely’s second blue operation began to become cautious, starting with mature hybrids and then gradually attacking pure electricity.

Moreover, compared with the scale effect and vertical integration, Geely is still far behind the top in the new energy market. At the same time, the new energy market is expected to break away from explosive growth and return to normal this year, and the growth rate may drop below 30%, which means that the new energy players in the market are beginning to enter the "knockout stage" and fight to the death for share. This competition has already begun at the beginning of the year – Tesla’s price war.

On the other hand, Geely itself also has to consider the financial situation. In the first half of 2022, JK recorded 760 million loss, while Geely Automobile’s net profit was 1.55 billion yuan in the same period. If it invests in Galaxy series pure electric products on a large scale, the net profit will be further eroded.

Therefore, for Geely, choosing the plug-in hybrid Galaxy L7 as the first model is a relatively safe solution. But the bad news is that in the 15-300,000 pure electric market, Geely still has no ace.

epilogue

For the past 25 years, Geely has represented a survival model for China’s own automakers, relying on capital acquisitions to fuel sales growth.

Starting with the $1.80 billion acquisition of Volvo in 2010, Geely has now become a shareholder of world-class car companies such as Proton, Daimler, Lotus, and Aston Martin after 12 years. Some people say that "a history of Geely’s automobile development hides half of the history of capital mergers and acquisitions."

It is undeniable that capital operation has brought real money to Geely, both in terms of brand and technology. But at the same time, the survival rule of "borrowing chickens and laying eggs" is also engraved in Geely’s genes.

The consequence is that Geely lacks the will to self-innovate. When the entire industry is moving towards electrification and intelligence, Geely still cannot throw away the glory of the era of fuel vehicles and adheres to the concept of "coexistence of traditional cars and electric vehicles".

What follows is that the comparison between the two old and new independent brothers continues, and they also need to touch more stones and cross more rivers.

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