In a world where the automotive industry is rapidly evolving, Geely Auto has made significant headlines with its relentless acquisition strategyOn September 30, Geely Holdings announced the completion of acquiring 7.6% of the equity in the renowned British luxury performance brand Aston MartinThis move marks another expansion of Geely's investment portfolio, a narrative that has unfolded repeatedly in recent years.

This acquisition of Aston Martin is Geely's fourth venture into foreign automotive enterprises in recent years, a clear indication of its ambitions to cement its presence in the global automotive marketSince securing Volvo’s ownership, Geely has proceeded to invest in various international brands, including Malaysian Proton, Daimler AG, and Renault Korea, solidifying its reputation as a ‘merger king’ in the auto world.

However, the effectiveness of Geely's global acquisition strategy appears to be diminishingRecent data shows that Geely sold a total of 122,635 new vehicles worldwide in August, reflecting a notable year-on-year growth of 39%. Yet, this figure pales in comparison to the leading sales of BYD with 174,915 units sold and Chery with 131,515 units, revealing a widening gap.

While BYD and Chery focus on research and development to innovate and improve their sales figures, Geely's strategy leans heavily toward acquiring stakes in other companies to gain advanced technologiesAlthough this approach may seem like an easier route to success, the challenges of this strategy are becoming increasingly apparent.

Upon acquiring the 7.6% stake in Aston Martin, Geely suddenly found itself in the spotlightHowever, reactions from the market were lukewarm at bestAfter opening lower by 2.4% on October 3, Geely's stocks eventually closed down by 0.55%. It wasn't until October 5, when the Hong Kong stock market experienced a significant rally, that Geely’s stock saw a 6.88% increase, though this rise was not primarily driven by the acquisition of Aston Martin.

Despite Aston Martin's strong reputation in China and its status as a historic luxury brand, the brand itself has faced serious challenges

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Since its inception in 1913, Aston Martin has gone through bankruptcy seven times, and despite various ownership changes, its financial health remains precariousAs of the first half of this year, Aston Martin reported total liabilities of £2.3 billion and a pre-tax loss of £285 million, with a market valuation of only $1.459 billion.

Clearly, Aston Martin does not boast the same level of brand equity as other luxury names like Porsche or Ferrari in the current market landscapeFurthermore, the potential benefits that Geely could derive from this investment remain uncertainWith Geely now being the fourth-largest stakeholder, its influence over Aston Martin's daily operations is limited.

Aston Martin has expressed intentions to pivot toward electrification and smart technology, but such a transition often requires considerable investment, and the ultimate financial outlay remains anyone's guessFor Geely, the motive behind this stake acquisition could simply be the prestige associated with owning a luxury brand, though the financial implications could be quite complex and substantial.

Geely's aggressive acquisition strategy, which has defined the company as a leading domestic brand in the automotive landscape over the past decade, began back in 2006. This marked the initiation of its global acquisitions with a 19.97% stake in UK-based Manganese Bronze Holdings, the main manufacturer of London taxisFollowing this initial foray into acquisitions, the company took bolder steps.

In 2010, Geely made headlines with the acquisition of Volvo from Ford for $1.8 billion, a deal that shocked industry observers and was characterized as a "snake swallowing an elephant." This transaction enabled Geely to gain not only full ownership of Volvo's automobile division but also a wealth of advanced technology, greatly enhancing its own manufacturing capabilities.

Buoyed by the success of the Volvo acquisition, Geely escalated its buying spree

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In subsequent years, the company acquired stakes in various international firms, including electric vehicle developer Emerald Automotive, and Malaysian DRB-HICOM, which allowed it to gain a 49.9% stake in PROTON and a controlling interest in Lotus Sports Cars.

Moving into the late 2010s, Geely's acquisition of 9.69% of Daimler AG in 2018 positioned it as the largest shareholder in the German luxury automaker, further underscoring its ambitions on the world stageDomestically, Geely has also pursued acquisitions, including the complete takeover of Dongfeng Nanchong in 2016 and investments in other companies like Anhui Hualing and Chongqing Lifan.

Over the last decade, Geely has engaged in nearly ten international acquisitions and around six domestic ones, making “buy, buy, buy” a cornerstone of its strategic approachHowever, as the landscape changes, the implications of this strategy are becoming increasingly complex.

The success of Geely's mergers and acquisitions strategy is undeniable, having propelled it to significant heights within the industryNonetheless, signs indicate that the effectiveness of this approach is waningSince its peak of HKD 36.04 per share last year, Geely’s stock price has been on a steady decline, culminating at HKD 11.5 on October 5, reflecting a staggering market cap loss of approximately 220 billion.

In contrast, the stock price of BYD has shown substantial growth in the past two years, with its price reaching 252.01 RMB per share by September 30, 2023. Although BYD's recent prices have fluctuated, the overall growth still represents a 57.96% increase.

Additionally, while Geely's sales numbers have shown slight improvements, they are not keeping pace with competitorsIn August alone, Geely sold 122,635 vehicles, a figure that while up from the previous year, significantly lagged behind BYD and Chery’s salesTotal sales for Geely in the first eight months of the year were 859,110, indicating only a 5% growth compared to the previous year, while BYD surpassed one million units sold.

Geely has also fallen behind in the electric vehicle market transition

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