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Not another car brand: Geely CEO on Lynk & Co

Several vehicle manufacturers have talked about launching new brands for connectivity and mobility services; Geely just went ahead and did it. Martin Kahl talks to An Conghui about the all-new Lynk & Co brand, its place in the Geely family, and its place in the global auto industry

Free2Move, EQ, Smart Mobility, Maven – 2016 has seen numerous mobility services sub-brands announced by major vehicle manufacturers tentatively preparing themselves for a future built around as yet untried and untested new business models.

These new brands will house activities such as ride sharing, parking services, connectivity and other new and growing service-based business models, and will operate – depending on the OEM – with differing levels of branding formality and grille badging.

Free2Move is PSA Group’s sub-brand for mobility services and new models; Daimler’s EQ will house a new generation of electric and connected vehicles; Smart Mobility is Ford’s offering, and GM’s strategy hinges around the Maven brand. At the time of writing, VW is yet to announce the name of its 13th brand, but it is expected to be a similar initiative.

The cautious approach of these western OEMs – lengthy timelines, long-term aims and slow ramp-up – might just have been too restrained, however. The unveiling in Berlin in October 2016 of the all-new Lynk & Co brand saw Huangzhou, China-based Geely Auto surge past the competition, with a physical product, a launch date and a clearly-defined strategy built around smart mobility, sharing and connectivity.

A new brand unveiled in Europe by a Chinese OEM for sale globally: clearly Geely is ready to launch a Chinese car brand for the world – but is the world ready for a Chinese car brand?

“We don’t think of Geely Auto cars as ‘Chinese cars’,” says An Conghui, President and Chief Executive of Geely Auto. “We design and produce international cars that have a hint of where they came from. On all of Geely Auto’s Generation 3.0 cars you will see hints of Chinese history, architecture and culture. But while these are nice features, the overall experience the driver gets is of a global car.

“Lynk & Co vehicles were devised from the outset to be European designed, European engineered and globally produced and marketed. The Lynk & Co vehicles will feature electrified powertrains and will be the most connected cars in the world, designed for modern, urban, tech-savvy consumers.”

We don’t think of Geely Auto cars as ‘Chinese cars’. On all of Geely Auto’s Generation 3.0 cars you will see hints of Chinese history, architecture and culture. But the overall experience is of a global car

Zero one – and counting

The first model – the 01 – is a compact SUV. Geely Auto’s parent company, Zhejiang Geely Holding Group (ZGH) acquired Volvo Car Corporation in 2010, and close collaboration between the Swedish and Chinese OEMs gives Lynk & Co access to Volvo and Geely’s jointly developed Compact Modular Architecture (CMA); the 01 and all future Lynk & Co models will sit on CMA.

The company says the 01 is the most connected vehicle ever, thanks in part to partnerships with Microsoft, Alibaba, Ericsson, and of course, Volvo Car. Targeted at tech-savvy users who will buy the cars online or from owned stores in retail locations, the company aims to sell 500,000 units between Q4 2017 – when the cars go on sale first in China – and 2020.

The company has good reason to be ambitious. Geely Auto enjoyed a record month in October, with sales growing 94% year-on-year to close to 100,000 units, and it has raised its 2016 sales target twice during the year, from 600,000 units to 650,000 units and then again to 700,000 units. For 2017, it has its sights set on a million units.

Much of the design and engineering was done in Sweden at China Euro Vehicle Technology Center (CEVT), with a brief for the cars to have a north European feel; premium cars at accessible prices, they will be positioned between Geely and Volvo.

CEVT is one of a number of global Geely locations. The company’s 10,000 engineers and 400 designers are located at global design studios in California, Shanghai, Gothenburg and Barcelona, and R&D centres in Gothenburg, Coventry, Hangzhou and Ningbo.

Preparing for the new (automotive) world order

The automotive industry’s new world order – based on, amongst other things, connectivity, mobility services and a sharing economy – is uncharted territory, making it difficult to guarantee success at this early stage, but essential to be ready. It’s a long game, indicates An. “With Lynk & Co we can come at this opportunity fresh and with a business model that is primed for today’s world. That means connectivity and flexibility in terms of how people purchase and use cars. We firmly believe this is the way the industry is going, and with Lynk & Co we want to get out ahead of that opportunity and take full advantage.”

Developed to function without dealerships, a focus on a still-to-be-announced subscription contract and an emphasis on shared use and mobility services: Lynk & Co appears to have been conceived as a brand for people who don’t want to buy cars.

“I wouldn’t say that Lynk & Co is for people that don’t want to buy a car,” counters An. “It is for people who want more flexibility over how they access their car, who might want to share it as they please with their friends, family or colleagues – or even rent it out to other Lynk & Co users. One of the ways we’re facilitating this is by moving towards a digital key. Physical keys are a thing of the past.”

All Lynk & Co cars will be permanently connected to the Cloud, “making Lynk & Co cars a part of the Internet of Things, allowing you to use the Internet when you are in the car or control your car remotely.”

As for how to sell cars to a new generation of consumers in China and in the West, An says the company identified the key factor as being young people’s permanent online lifestyle. “They have become embedded in a connected world. People expect connectivity, not just when they are at home or at work, but also in their ‘third space’, their car. So it was natural and critical for us to capture that trend and develop a model that’s appealing to consumers.”

Lynk & Co will have its own dedicated app market, open to developers with leading application programming interfaces (API) and software development kits (SDK) to create connectivity-related services and products. “Sharable locks are just one thing that we’re looking at, but as they say, the world is our oyster at this stage.”

Lynk & Co vehicles were devised from the outset to be European designed, European engineered and globally produced and marketed

The sharing economy

Car sharing is an important aspect of the Lynk & Co business model. “Think about it,” says An. “95% of the time cars sit around idle. What if there was a way to safely loan or share them out? It sounds less crazy than a few years ago as now we’re sharing our lives on social media, sharing our homes on AirBnB and sharing our musical tastes on Spotify. What if we could share our cars, too?”

When it comes to the sharing economy, Lynk & Co can look to Geely Auto’s parent company for assistance. Zhejiang Geely Holding Group (ZGH) has for some time been exploring ride sharing. ZGH operates a 24,000-vehicle service across 12 Chinese cities called Zuo Zhong You, which allows people to rent pure electric micro cars for Yuan 20 to 25 (US$2.90 to US$3.63) per hour. Users can book cars over the phone or via the app, and collect a car from their local distribution centre. When finished, they return the car or drop it off at another centre.

An cites the example of someone flying from Shanghai to London. When they land, they need a car to visit a friend out in the suburbs and they can see from the Lynk & Co app that there is a car available at Heathrow Airport. As a part of the Lynk & Co network, they can rent that car for a period and return it later or to a pre-arranged place. Think of it as a community of Lynk & Co users, notes An.

Another service that ZHG has established is Cao Cao, an on-demand ride-sharing service that runs predominantly with new energy or pure electric vehicles, mostly from Geely Auto, and uses directly-employed drivers. Currently available in five cities across China with over 8,000 cars in operation, the OEM has ambitions to grow Cao Cao further.

The Lynk & Co vehicles will feature electrified powertrains and will be the most connected cars in the world, designed for modern, urban, tech-savvy consumers

Heading downstream

As noted earlier, several OEMs have announced mobility services sub-brands to house their downstream activities in an effort to capitalise on the revenue available to unrelated businesses once the vehicle has left the dealership. Many readers will remember with a wry smile or a grimace the efforts of vehicle manufacturers in decades past when they attempted to capture downstream revenue from car rental and vehicle servicing, for example. Companies that know how to make money selling cars are not necessarily able to generate sufficient revenue from selling services and packaged concepts. Will all vehicle manufacturers be able to compete downstream in the automotive industry of the future?

In China, Geely customers are already eagerly awaiting new Geely products, says An. “I think the Lynk & Co marketplace is unique to us – we control the APIs and SDKs and have opened them to developers. We’ve also implemented a great deal of security. Add to this the automotive finance company we have with the French bank BNP, which will initially serve Geely and Volvo dealerships, but is later expected to also go to other brands.”

Disruption

Some of the major OEMs might be intrigued if not concerned about the challenge laid down by Lynk & Co, but all vehicle manufacturers have been rattled in recent years by attempts from non-automotive tech companies to enter the automotive industry. “The number of new entrants into the auto industry in the past few years is a testament to how exciting the sector is,” agrees An. “Tech companies are undeniably creative, but many people underestimate how high the threshold is in the auto industry and the long-term investment it requires in design, R&D, and operations.

“Lynk & Co’s business model is unique to the industry. The current automotive business model of moving cars from the factory to the dealership to the end user is over 100 years old, and it is changing with the development of new technology.” For Lynk & Co, disruption is clearly the name of the game, and the company aims to challenge and redesign every link in the chain.

Echoing comments made by many a senior executive on this subject, An says, “In many cases, we look at tech companies as potential partners rather than competitors. And the traditional industry is itself making significant progress in technology.”

Success in the new mobility market means accepting and adapting to the culture surrounding new mobility. Concepts like open sourcing and sharing have long been alien to the automotive industry, yet they are at the heart of new mobility business.

“The last few years have seen a real shift in the way auto companies think,” agrees An. “They are much more nimble and creative than they once were. And that’s come out of necessity, because the world and the way consumers look at cars is changing. Our cars are open and accessible to developers, and our APIs and SDKs are available to make the most of what is essentially a computer on wheels for our Lynk & Co brand.

“We’re also working on the CMA architecture to develop new ways to streamline production whilst bringing to market the most competitive products possible.”

95% of the time cars sit around idle. What if there was a way to safely loan or share them out? It sounds less crazy than a few years ago as now we’re sharing our lives on social media, sharing our homes on AirBnB and sharing our musical tastes on Spotify

Electrified and autonomous

Not surprisingly, given China’s push on new energy vehicles, alternative powertrain energy is at the core of the Geely Auto Group strategy, says An. “In November 2015, we launched the Blue Geely Initiative in which we announced that 90% of our vehicles will be new energy with pricing at the same level as traditional gasoline powertrains. This includes Lynk & Co vehicles.”

The company plans to cut its fleet average fuel consumption to under five litres per 100km (equivalent to 56mpg) in the short term, ahead of Chinese government requirements, and, notes An, “against the cries of our competitors who think this target is too difficult to achieve.”

By 2020, the OEM is aiming to reduce its average fuel consumption from 1.8 to 1.5 litres per 100km of driving. “We’re really aiming to push the envelope of what can be achieved. Under the Blue Geely Initiative, we’re promoting three core technologies, namely HEV, EV, and PHEV. Around 65% of our sales will come from HEV and PHEV, and 35% from EV sales.”

In EVs, the company has some experience, says An. “The Geely Emgrand EV sedan can already travel 253km (157 miles) in a combined environment, and around 330km at a steady highway speed for a cost of Yuan 223,000 (US$32,360), which the local and national government in certain regions will support up to 50%. Our next EVs will be lighter, charge faster and go even further per charge at a lower cost. In the Beijing area alone we’re selling around 1,500 Emgrand EVs per month, so I think we’re off to a good start.”

Also high on the priority list for both Lynk & Co and Geely Auto – indeed, “at the very core of our technology focus” – is autonomous driving. “For Lynk & Co, technology is at the very heart of the car. We have an always-connected Cloud producing hundreds of gigabytes of data every single day, we will have high-end driver aids to assist the driver in everyday driving and eventually, when laws allow, we will move to full autonomous driving. The move to autonomous driving cannot be rushed. Thankfully we have a close relationship with the world leaders in safety and autonomous driving – Volvo – so we will be able to share resources.”

Lynk & Co is for people who want more flexibility over how they access their car, who might want to share it as they please with their friends, family or colleagues – or even rent it out to other Lynk & Co users

The long game

Conceiving new business models and ideas is one thing – putting into motion concepts that will be crucial long-term but offer very little in the way of revenue generation in the near to medium term is a very different matter. An concurs: “Any business that wants long-term success has to make long-term bets. And we’re fortunate to be coming at this from a healthy position, and with a history of making bold moves that paid off.

“In the early 1990s, when our Founder and Chairman, Mr. Li Shufu, decided he wanted to get into the car business, state-owned enterprises were the only companies allowed to make cars. Just over two decades later, we are the largest privately-owned car maker in China. In 2007, we revamped our entire brand approach, moving away from a focus on low cost toward beautifully designed, high-quality vehicles. If you look where we are now, it’s clear that move paid off too.”

The current automotive business model of moving cars from the factory to the dealership to the end user is over 100 years old, and it is changing with the development of new technology

It could be argued that creating an entirely new brand adds complexity, rather than using Geely or Volvo. An explains the rationale behind the decision: “Geely Auto is positioned more as a mass market brand. We expect sales to be around 700,000 units this year and probably around 900,000 to one million next year.

“Lynk & Co is Geely Auto Group’s truly global offering, targeting the mid-market. Future Lynk & Co models will be sold in China, Europe, and the USA. So we let them go ahead with the latest technology and powertrains which will eventually be used in the Geely brand.

“Volvo is a brother company to Geely Auto Group, and it is also a teacher. The chairman has always pushed for the ‘Tiger to be returned to the mountain’. That means letting Volvo do what it does best – making the safest, most intelligent vehicles on the market. And that is working especially well – just look at Volvo’s sales figures, which are at an all-time high in the company’s 89-year history.”

At the same time, the company’s chairman and founder is pushing for Geely Auto and Volvo to work together to maximise group synergy. There is much that Volvo can teach Geely Auto about R&D, and Geely Auto has plenty it can teach Volvo about supplier management and cost control, notes An, adding, “It’s a Sino-Swedish win-win story.”

 

This article appeared in the Q4 2016 issue of Automotive Megatrends Magazine. Follow this link to download the full issue.