Will Geely be a second Tengzhong?

The affair that Tengzhong Heavy Industrial Machinery Corporation (short for Tengzhong) purchased the Hummer will definitely be one of the biggest events in the automobile industry. This event has triggered different comments within the industry, among which negative views take a dominating position. It is widely believed that it is a step backward to purchase such a gas-guzzling vehicle of Hummer. In fact it is easily understood that what Tengzhong really appreciate is not just existing models and products of the Hummer, but its brand and technology.

If Tengzhong is indeed able to do this, then with the brand and technology of Hummer and the understanding to Chinese market of Tengzhong, Tengzhong will soon blaze a new trail in China's SUV market. Since the Hummer generally favored in the Chinese market, what a rolled-up whirlwind the Chinese-style Hummer of Tengzhong will bring! Moreover, Tengzhong’s Chinese version of big Hummer, small Hummer and Chinese-style Hummer will easily open the international market and bring about a qualitative leap in Chinese-made SUV. Then our Chinese-made SUV will enter the world’s mainstream market. So, considering the ultimate goal, it deserves highly praised and affirmativeness for Tengzhong to purchase the Hummer.

However, citing an undisclosed source from Hangzhou Daily, Tengzhong do not win the affirmativeness of outside world. Even though the two sides have already signed a cooperation agreement, doubts of the outsiders has not stopped. What is worse, the relevant state ministries and commissions have not expressed their approval. Why so a wonderful issue can not receive affirmativeness and support? The answer is actually too obvious. It is all because Tengzhong is just a private enterprise. The originally institutional defects make the Tengzhong stagger fatally. The issue the Geely will purchase Volvo has emerged recently. Will the Geely who has a stronger influence become the second tengzhong? Today it is the Hummer that is killed, next time, will it be Volvo?

According to previous reports, Geely is the only enterprise that has acquired the approval of National Development and Reform Commission. However, this permit is said to be limited to only agree Geely to participate in international mergers and acquisitions, which does not mean that after the successful acquisition, Geely will be able to obtain the government’s approval. Under the current Overseas Investment Regulations, overseas investment more than 100 million U.S. dollars must be approved by the relevant ministries of the State Council. Obviously, it will cost Geely more than 100 million U.S. dollars to merge Volvo.

Since previously news have reported said Geely has already received the approval of National Development and Reform Commission, the public hold a optimistic attitude to the acquisition of Geely. But it is far beyond the truth; to obtain the right of bargaining is just the beginning. What we can not ignore is that Geely is also a private enterprise though it has been developed under the affirmativeness and cultivation of the country.

To Geely, The originally institutional defects may possibly be setbacks later. Therefore, when discussing the possibility of the successful acquisition of Volvo, at the same time, we wish to see Chinese enterprises successfully achieve the acquisition of international brands conforming to the market laws, the tragedies similar to Tengzhong’s will never appear again. We do not want to see Geely to be a second Tengzhong. When types of agreements on the saying ‘the country is forward while the private enterprises are back’ are springing up everywhere, private enterprises are gaining the attention of the public.(Translator: Yalong/ Jessie)

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