In the second quarter of this year, Geely’s senior leadership took on a pivotal challenge: R&D integration. Geely, known for its adaptability, regularly implements systemic adjustments. Yet, this time, the scale and impact of the integration—affecting both executives and frontline employees—are unprecedented.
This extensive overhaul, driven by fierce industry competition, aims to unify nearly all of Geely’s passenger vehicle R&D operations.
According to sources from 36Kr, the integration targets include Geely’s automobile research institute and various sub-brand teams focused on autonomous driving, cockpit systems, electronic and electrical architecture, electric powertrains, and vehicle platforms, as well as procurement and supply chain operations.
Chairman Li Shufu is personally overseeing the integration, with president An Conghui at the helm.
“Throughout the second quarter, Li frequently convened high-level meetings to discuss this matter, and the CEOs of various brands also held frequent discussions,” several Geely insiders told 36Kr.
This large-scale integration has also triggered key personnel changes within Geely. Sources informed 36Kr that Shen Yuan, former senior vice president of Geely and general manager of Geely’s innovation center, will assume the role of CTO within the group.
Shen, who holds a PhD in mechanical engineering from Michigan State University, joined Geely in 2010, where he focused on powertrain development and established Geely’s core engine development team.
The previous CTO, Feng Qingfeng, was a key figure in Geely’s automotive development. Since Feng’s departure from Geely’s R&D system in 2020, the CTO position has been vacant. During this period, Geely’s sub-brands rapidly expanded, with Zeekr, Lotus, and others establishing sizable R&D teams, leading to functional overlap.
A Geely insider revealed that, within Geely’s system, there are five teams working on autonomous driving: the research institute’s autonomous driving center, Zeekr’s in-house team, Lotus’ team, the subsidiary eCarX, and Freetech, which spun off from Geely.
During periods of growth, independent operations of different units can foster innovation and expansion. However, in times of fierce competition, cost reduction and efficiency improvement become crucial, and Geely, with its vast system, can no longer afford to stand still.
Team integration and supply chain unification
Geely’s core entity, Geely Auto, includes the Geely, Lynk & Co, Zeekr, and Proton brands, with its automobile research institute responsible for R&D across these brands.
In addition, Geely owns independent sub-brands like Zeekr, Lotus, Volvo, and Polestar, each with its own R&D team.
Duplicated development and resource waste are inevitable. Several Geely engineers candidly told 36Kr that integration was necessary: “Sometimes, the research institute develops something, and then a sub-brand goes on to develop something identical.”
For the automotive industry, where scale is vital, the balance between platformization and customization has always been a challenge. The pendulum swings with industry cycles, and today, automakers are unanimously choosing to enhance platform development, reduce redundant resource investment, and maximize output efficiency.
Geely is no exception. 36Kr’s analysis reveals that Geely’s R&D integration efforts have already entered deep waters, with a clearer roadmap emerging.
Geely’s R&D hub is the automobile research institute, which houses a function development center and an engineering technology center, among others. The former is responsible for developing new technologies such as cockpit systems, autonomous driving, and electronic and electrical architecture, and it is the department undergoing the most intense integration efforts.
Several informed sources told 36Kr that the cockpit systems and electronic and electrical architecture teams have already undergone extensive integration, with the research institute consolidating the R&D operations of various sub-brands. “For example, aside from the research institute, only the Zeekr team for cockpit systems has been retained, while others like Lotus have been unified.”
However, 36Kr has learned that the integration strategy for autonomous driving R&D remains unclear. “Brand leaders have met several times to discuss it, but no consensus on the integration priority has been reached.”
According to a Geely insider, it would be logical to center the integration around Zeekr, given that Zeekr’s in-house autonomous driving team has already produced tangible results in areas such as urban autonomous driving.
“Zeekr’s in-house autonomous driving team consists of about 700 people. Apart from the chips, everything from domain control to upper-level algorithms is developed in-house,” a Zeekr representative revealed.
However, if the integration were centered on Zeekr, other brands would not easily concede. On one hand, there are concerns that the investment in in-house autonomous driving development is too high. On the other hand, each brand has its own business plans. For instance, Lotus has integrated Momenta’s algorithms and is selling its autonomous driving solutions externally.
Alongside the adjustments in the cockpit and autonomous driving departments, Geely’s vehicle development is also shifting toward platformization, which involves the institute’s engineering technology center. The center focuses on vehicle development for sub-brands. An engineer from the research institute told 36Kr that their work is more like directing—designing the platform, presenting a certain style, and highlighting certain characteristics—while providing sub-brands with a regulator to help them build their vehicles effectively.
According to 36Kr, the integration strategy for the engineering technology center is primarily “1+1,” with minimal staff reductions: “It’s more about bringing things together and focusing on platform development.”
Platformization also entails the unification of procurement and supply chain systems.
A source close to Geely told 36Kr that each brand originally had its own subsidiary responsible for procurement and supply chain management, but have now been integrated into Geely’s unified procurement subsidiary. Post-integration, supply chain quality control teams have already seen significant downsizing.
Moreover, Geely has previously made extensive arrangements in the battery segment, which accounts for the highest proportion of vehicle costs. 36Kr learned that there is also potential for integration among VREMT, a Zeekr subsidiary, Yoening New Energy, which supplies batteries for the Galaxy product line, Anchi New Energy, which produces commercial vehicle batteries, and Yaoneng New Energy, which collaborates with Farasis Energy.
For instance, both VREMT under Zeekr and Yoening under the Geely system use Contemporary Amperex Technology (CATL)’s batteries for their battery packs, and they also conduct in-house battery development. There is a lot of resource overlap.
VREMT, which is part of Zeekr, had launched the in-house developed “golden brick” battery. However, insiders revealed that VREMT has already started streamlining and focusing its operations.
“VREMT originally planned an in-house ternary battery project, which has now been put on hold. The forward-looking battery R&D team in Shanghai has also been relocated to Hangzhou Bay,” an insider disclosed.
This R&D integration within Geely has not significantly impacted brands like Geely, Galaxy, and Geometry, which lack in-house R&D teams. However, core sub-brands with in-house R&D teams, such as Zeekr, Lynk & Co, Polestar, and Lotus, are at the center of this transformation.
While the integration is not yet complete, it is undoubtedly a move that will influence Geely’s long-term development. At this critical juncture of industry upheaval, Geely needs a more efficient technical system.
“If we don’t integrate now, it could be dangerous”
The emergence of new energy vehicles (NEVs) has provided the Chinese automotive industry with an opportunity to leap ahead, and Geely has even higher ambitions. President An, who is also CEO of Zeekr, has repeatedly stated that Geely hopes to become the Volkswagen of the new energy era.
Geely’s multi-brand strategy has consistently been pushing in this direction, with Zeekr, Lynk & Co, Galaxy, Lotus, Polestar, and Volvo all striving to secure their place in their respective market segments.
However, a multi-brand strategy also means fragmented R&D systems. Geely’s research institute can provide technology for some brands like Geely and Galaxy, but core sub-brands like Zeekr and Lotus each have their own development systems. Zeekr alone has three product lines, which have developed models like the Zeekr 001, 007, and X.
In today’s automotive market, competition is as fierce as ever. A fragmented R&D and supply chain system leads to scattered efforts and redundant investments, making focus essential for remaining competitive.
“If we don’t integrate now, it could be dangerous,” several veteran Geely employees told 36Kr.
Take BYD as an example. It employs a structure where the central institute handles R&D, and the brand institute handles vehicle integration, with an engineering institute and planning institute as the core. These provide technical support and vehicle development for various sub-brands, from the basic Seagull to the high-end Yangwang, all requiring the support of the two institutes.
Such a structure can more smoothly drive platformization and standardization. In an exclusive interview with 36Kr, Yang Dongsheng, director of BYD’s new technology institute, noted that the company’s chairman Wang Chuanfu is also closely monitoring the group’s platformization and standardization R&D work.
When developing models, BYD not only standardizes sensor configurations but also standardizes braking, steering, and driving systems, and even the placement of components. This maximizes the benefits of economies of scale.
Similarly, the R&D teams of Rising Auto and IM Motors—both part of SAIC Motor—are also rumored to be integrated into the parent company’s research institute. The goal of every major automaker is clear: implement platform-based R&D strategies.
Platformization can improve both R&D and supply chain efficiency. However, balancing the need for customization required by these top-tier brands remains a challenge for group leaders.
A supply chain executive at a leading automaker told 36Kr that the company has been implementing platform-based development since last year. “Even seats are not spared,” the executive said. But R&D leaders are also grappling with how to maintain customization while standardizing.
Therefore, it is easy to foresee that Geely’s widespread R&D integration will be challenging to accomplish in one go. It requires constant negotiation between different business lines to reach a consensus and eventually establish a new R&D system.
In terms of sales, Geely still maintains a leading position, with total sales of 245,800 vehicles in July, including over 110,000 NEVs. If this scale is combined with platformization, there is still significant room for improvement.
In the first half of 2024, Geely Auto achieved growth in both revenue and profit, with a gross margin exceeding 15%. Deputy CFO Dai Yong attributed this mainly to increased sales, net profit growth due to scale, and a reduction in corporate expense rates.
Financial reports show that Geely Auto’s sales expense ratio decreased by 0.6% in the first half, and administrative expense ratio decreased by 0.3%, while the sales target was raised from 1.9 million to 2 million units.
To achieve better profitability in the second half of 2024, Geely Auto will need to reduce costs and improve efficiencies further.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Han Yongchang for 36Kr.