Geely must capitalise on Volvo's heritage to create China's first global auto brand

With a little more than a decade’s worth of experience in a genuine market environment, the local car manufacturer’s major challenge has been image. It may be operating in one of the bright spots for the global auto industry (the largest, in fact, by number of vehicles sold) and has achieved strong results over a relatively short period of time given its reputation as a good value for money purchase. But typical consumer perceptions are somewhat discouraging when it comes to safety and reliability. Given the choice between a Geely or a foreign car at the same price, local consumers have generally favoured the foreign option.

Like many Chinese companies, Geely’s branding issues are complicated. It’s not that it doesn’t understand the importance of brand value and image. It’s putting the rationale into place that’s been a challenge.

The Volvo deal, however, gives the maker of low-end, inexpensive automobiles instant access to almost a century’s worth of hard-earned brand equity. It allows the company - in true Asian form - to leapfrog the conventional branding curve.

Acquiring a well-known brand is undoubtedly the quickest route for Geely to move up from making cars for the masses to cars for the affluent. The Volvo brand resonates well with affluent and sophisticated buyers, and should allow the Chinese company to compete on more than just price.

It remains to be seen, however, whether Geely can make Volvo successful where other, more experienced, companies have struggled. And how will luxury car buyers feel about Volvo under Chinese ownership? Add in the well-documented problems that the ‘Made in China’ tag suffers overseas, and it appears that the outlook is considerably more modest than the hype warrants.

When it comes to overseas acquisitions, the Chinese track record is mixed. There are plenty of failed examples. Geely would do well to note in particular the experience of Nanjing Automobile, which acquired struggling UK auto brand MG Rover in 2005. The acquisition was hailed as an opportunity to move Chinese manufacturing to another level. But the MG brand went nowhere and its parent was swallowed up by rival automaker, Shanghai Automotive Industry Corporation.

While acquisitions maybe a convenient short cut to building brand legacy, they aren’t a substitute for great marketing, and they can in fact demand more branding effort. In Geely’s case, much will depend on how well it preserves the Volvo brand. But for a marketing industry that’s pinning its hopes on the emergence of a global Chinese brand, the Geely-Volvo story may yet offer a unique chance for innovation.

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This article was originally published in the 22 April 2010 issue of Media.