"Shouldering the sales burden of Geely's new energy vehicles, can Geely Galaxy, by absorbing Geometry, conquer the mid-to-high-end market?"

@TechInsights Original

Nine sons born to the same mother, yet each unique. As Geely Group's portfolio expands, its passenger vehicle sub-brands multiply, leading to pronounced internal competition and overlapping positions.

According to TechInsights' observations, the development of Geely Group's various brands, including Geely, Volvo, Polestar, Lotus, Geometry, Galaxy, Zeekr, Lynk & Co., and LEVC, exhibits varying degrees of success, with uneven growth momentum. After rounds of market competition, these sub-brands have diverged in their ultimate fates.

Geely recently announced that Geometry, previously positioned as a high-end electric vehicle brand, has officially merged into Geely Galaxy, Geely's mid-to-high-end new energy vehicle sub-brand. This move is widely seen as Geely's first salvo in its "strategic integration." However, compared to Geometry, Geely Galaxy's previous performance has not been particularly outstanding. Thus, it remains uncertain whether this integration will alter Geely Galaxy's fortunes and impress the market.

01.

Integration of Geometry: Complementary or Burdensome?

On the surface, Geely Galaxy appears more fortunate in absorbing Geometry. However, internally, Geely's attempt to boost sales by integrating Geometry and launching relatively low-priced A0-class sedans may face multiple challenges.

On the positive side, the integration of Geely Galaxy and Geometry can enhance their product, technology, and brand competitiveness through complementarity. However, prior to this, Geometry and Galaxy had different development paths.

Geometry, focused on pure electric vehicles, did not fully leverage Geely's advantages in the gasoline vehicle segment. When Geometry launched around 2019, both Geely insiders and consumers had high expectations. However, the actual products fell short of these expectations.

At the time, Geely aggressively marketed Geometry, even directly competing with Tesla. Still, most potential customers ultimately chose BYD Qin Pro instead. The root cause was that, despite its high-end positioning, Geometry's materials and in-vehicle systems fell short of premium standards.

Geely Galaxy's fortune lies in its success with the Galaxy E5, demonstrating that competition in China's new energy vehicle market should not solely revolve around price wars. High-value, high-quality benchmark products are what users truly desire. Conversely, flashy but insubstantial offerings may fall flat.

After Geometry officially merges into Galaxy, "GEOME" will become Galaxy's smart compact car series. If it can adhere to Geely Galaxy's current development characteristics, it may indeed achieve complementary advantages.

However, in terms of market position, the A0-class sedans launched by Geely after integrating these two brands will face competition from BYD Seagull and Wuling Binguo. In the sedan market, the former ranked first, and the latter sixth, in the first half of 2024. Whether the Xingyuan series can find a niche and support Geely's ambition to boost sales through price cuts remains to be seen.

If Geometry's past practices of cost-cutting corners and smart tricks persist, Geely Galaxy may suffer a similar fate.

In fact, the market response to Geely Galaxy's absorption of Geometry has been mixed, with intricate emotions in the industry, capital markets, and consumer markets, reflecting potential challenges on multiple fronts. Geely Galaxy faces new challenges in capacity, supply chain resources, technology integration, corporate culture differences, and market competitiveness.

Whether Geely's move will be a thunderous announcement with little substance or a decisive strike remains to be seen.

02.

Difficulty in Replicating Blockbusters; Insufficient Brand Momentum

With the successful precedent of Zeekr, positioned in the high-end market, Geely Galaxy's development path is clear.

Since its establishment in March 2021, Zeekr has launched several blockbuster models like the Zeekr 001 and 007 and is rumored to be preparing for an IPO, establishing itself as a star sub-brand under Geely. This has given Geely confidence to conquer the mid-to-high-end market through the Galaxy series.

Geely's bet on the mid-to-high-end market is timely. Beyond Zeekr, positioned as a high-end smart electric vehicle, Geely needs to preemptively establish its brand and product layout to capture a significant share of the mid-to-high-end new energy vehicle market.

After Geometry's setback, this responsibility naturally fell on the Galaxy series. However, in the crowded mid-to-high-end segment, each Galaxy model faces formidable competition and occupies an awkward position.

Compared to Zeekr, with a clearer positioning, Geely Galaxy struggles to find its niche. In the premium market, rivals like Tesla, Xiaomi SU7, and Wenjie, bolstered by their brand power and smart driving capabilities, even Geely's own Zeekr, pose threats.

Meanwhile, cost-effective brands abound, including traditional automakers transitioning to new energy, BYD, Chery, and up-and-coming EV makers like NIO, XPeng, and Li Auto.

Market data shows that from the L7 and L6 in the HEV series to the E8 in the BEV series, Geely Galaxy has been lukewarm until the E5 became a blockbuster, surpassing 10,000 units in its first month of sales. In the first half of this year, Geely Galaxy sold 81,000 units, a year-on-year increase of 742%. According to Geely's financial report, new energy vehicle sales attributed to the Geely brand were approximately 106,000 units, of which Galaxy accounted for about 76%.

However, some test drivers have noted that while the Geely Galaxy E5 can compete with the BYD Yuan PLUS, it risks pandering to the market, revealing a lack of brand confidence. Competing models include the Shenlan S7 and Chery Shuxiangjia, while the Galaxy E8 faces tough rivals like the Xiaomi SU7 and BYD Han.

Although the Galaxy series contributes significantly to Geely's sales, the relatively popular Galaxy E5 ranked only eighth in domestic compact SUV sales in September. This underscores Geely Galaxy's challenges.

Geely Galaxy faces awkward positions with each model. At the brand level, Tesla buyers may also be drawn to Zeekr. At the main brand level, Geely Galaxy overlaps significantly with BYD. Model-wise, Galaxy sales lag behind competitors, indicating it's not a top choice for consumers.

Even the "honor student" Galaxy E5 faces challenges in replicating its success.

03.

Quality Concerns and Multifaceted Challenges

Price and sales volume often conflict. Facing formidable competitors like Tesla and BYD, Geely Galaxy merged with Geometry to pursue volume sales, aiming to reduce costs through scale production and boost market share. However, challenges and opportunities coexist.

Geely Galaxy's foray into the mid-to-high-end market is not without leverage. Geely's integrated technology ecosystem, encompassing smart energy, autonomous driving, smart connectivity, and smart cockpits, is taking shape. Integrating Geometry into Galaxy positions it as the ideal candidate to reach the mass market.

While Geely Galaxy has advantages, it faces multifaceted challenges in brand power, product strength, quality, and after-sales service, especially in a fiercely competitive segment. Although the E5 became a blockbuster, achieving over 10,000 sales in its first month,

Market feedback on Galaxy models is mixed. The L7 in the HEV series and the E5 and E8 in the BEV series have received both praise and criticism. Critics argue that while the E5's success lies in its cost-effectiveness, its product features are unremarkable, making it a suboptimal representative of Geely Galaxy.

Some media reviews highlight the E5's shortcomings, such as its use of second- or third-tier battery cells to achieve cost-effectiveness and its lackluster range performance. Despite branding itself as "smart electric," Galaxy lacks advanced driving assistance systems.

Moreover, quality issues plague Galaxy models. Complaints about issues like gear shifting hesitations, abnormal engine vibrations, and persistent noises upon starting and locking have surfaced on car forums. Customers have expressed dissatisfaction with the brand's service attitude and even organized online petitions.

Geely launched the Galaxy sub-brand to capture the broadest automotive market, leveraging its strengths in both gasoline and new energy vehicles. However, most Galaxy models have failed to ignite sales, prompting Geely to integrate Geometry in hopes of realizing economies of scale. Yet, the market won't be swayed solely by internal restructuring. Whether Geely Galaxy's volume sales ambition will be realized remains to be seen with the launch of the all-new A0-class pure electric car, Geely Xingyuan.

Like fingers of unequal length, integrated Geely Galaxy faces internal challenges from overlapping positions and competition with other brands. Externally, it struggles for industry standing amidst formidable rivals, making it unlikely to shoulder Geely's hopes for a full transition to new energy vehicles.

References: 1. "Geely Galaxy E5: Heating Up More Than Just Geely's Sales" - Autokline 2. "Galaxy Absorbs Geometry: Can It Support Geely's Volume Sales Ambition?" - 21st Century Business Herald 3. "The Aggressive Geely Galaxy: Can It Replicate Zeekr's Success?" - Auto Intelligence 4. "Geely Announces Merger of Geometry into Galaxy Brand: What's the Significance?" - China News Auto