Letter from the Chairman

Li Shufu, Chairman of Zhejiang Geely Holding Group

How we find room to grow in a changing world

Dear friends and colleagues:

In 2019, when the spring returns, there is a fresh start for everything. After a memorable year in 2018, we are about to enter a new year that will be full of new challenges and opportunities.

Everyone in the group should share their passion for the opportunities to come and prepare for the tasks ahead. On behalf of Zhejiang Geely Holding Group’s board of directors, I wish a happy new year to all of our colleagues, partners, employees, and customers. I would also like to express our thanks for your hard work and contribution to the Group’s development.

In 2018 in China, we marked the 40th anniversary of the country’s reform and opening up. It was also a crucial year for China’s economy as it continued to transition from high-speed development to a new stage of high-quality development. This coincided with a year of black swan events that have occurred around the world, affecting the development of the global economy.

Over the past year, the global automotive industry has undergone many changes. As new technologies and powerful trends have begun to reshape the market-place, traditional automakers have not stood idly by. They have embraced partnerships and have actively responded to growing challenges. Technology companies have taken the opportunity to build their online capabilities and seize market share. This was a very busy year for everyone, creating opportunities for some and reducing the power of others.

In 2018, Volvo Car Group announced that by 2025 around half of its sales would be all electric cars and with a third of sales being self-driving capable as well which has further strengthened the strategic direction of comprehensive electrification and highly intelligent vehicles. On September 5th Volvo announced the totally autonomous 360C concept car which shows the capability of a future completely connected autonomous vehicle showcasing the potential change that driverless cars will bring.

Volvo Cars and Geely Auto joint developed CMA architecture has already received global praise, with models such as the Volvo XC40 being awarded European Car of the Year and Japanese Car of the year.

Polestar continues to be a pioneer of electric car development with continued innovation inside Volvo Car Group, using pure minimalist design and high-performance capabilities which is already appealing to many consumers.

In 2018, Volvo global sales have exceeded 600,000, setting a new record for the fifth year in a row. As of June 20th 2018 , Volvo’s first US factory is already in operation and will create approximately 4,000 new jobs and completing Volvo’s global manufacturing layout with plants across Europe, China, and now America.

In 2018, Geely Auto has deepened its refined cars development strategy which has given its users an even greater sense of refinement. Against all odds, Geely Auto has grown and thrived in a difficult market.

Meanwhile, Lynk & Co has also launched a series of new models, attracting an increasingly younger consumer base to this new brand. At Proton Cars, the first model jointly developed from the Geely Auto and PROTON partnership, the Proton X70 SUV has been launched in Malaysia, initiating PROTON’s complete revitalization.

Lotus celebrated its 70th anniversary and have continued to maintain their leadership in the development and production of lightweight high-performance sports cars.

2018 was also the first year Geely Auto fully entered into the new energy vehicle era. Cooperating with partners around the world, Geely Auto is moving to build a global industrial value chain that can provide customers with highly competitive new energy and electrified vehicles. This will ensure that Geely reaches its ‘20200 strategy’ (where Geely Auto Group aims to produce and sell 2 million vehicles per year by 2020, 90% of which will be electrified or alternative energy) goals and show our commitment to society. At Geely Holding Group, significant progress has also been made in the field of new energy commercial vehicles and commercialization of methanol vehicles.

The London Electric Vehicle Company has moved to become the pioneer of zero-emission vehicles in the global urban transportation sector.

This year, Geely Auto production and sales have exceeded 1.5 million units, with a strong balance between sedans and SUV models. Many models have continued to be market leaders within their respective segments.

Geely Auto’s R&D capabilities has also been enhanced with new scientific and technical achievements emerging endlessly from their labours. Geely has launched more than 10 models that are equipped with Level 2 assisted driving capabilities, making a breakthrough among Chinese brands. The highly acclaimed newly developed B-segment modular architecture BMA, which also carries Geely’s L2 technology, will further the adoption rate of L2 capable vehicles as more products launch.

In 2018, great progress was made as Geely invested in education programs with the various business units of Mitime Group undergoing a strong transformation.

The Zhejiang Li Shufu Education Foundation has been renamed Zhejiang Li Shufu Public Welfare Foundation as it upgrades its mission to address societal challenges with long lasting and meaningful poverty alleviation programs.

Geely’s “Timely Rain” targeted poverty alleviation project has been implemented over the two years with Geely offering education and skill training to those who need it most.

In China, Geely has helped to lift people out of poverty caused by a lack of opportunity, uneven industrial change, inefficient agricultural practices, and other reasons. The project has so far helped more than 10,000 students attend school and even obtain employment within the Geely Group. It has also started more than 20 sustainable agricultural cooperative enterprises in 32 villages giving them the ability to thrive and lift themselves out of poverty.

In 2018, Zhejiang Geely Holding Group has actively promoted the growth of innovative technology companies across the Group, which is helping to transform traditional automakers into mobility service providers.

Zhejiang Geely Holding Group has established the Geely Technology Group that is moving towards the development of new technologies. By combining Internet, big data, artificial intelligence and other technologies, Geely’s GKUI system has become an intelligent ecosystem that lays the foundation for the Internet of Vehicles. Cao Cao Ride Hailing has entered into 30 cities in across China. We have also joined hands with Daimler as both parties begin exploring into the development of high-end private mobility services. Separately, we have moved to work with Tencent, China Railways, CASIC, and China Telecom where we are laying the groundwork of next generation mobility services and technologies which includes railway mobility services, supersonic trains, industrial internet, 5G, V2X and other cutting-edge technologies for the realization of a three-dimensional smart mobility ecosystem.

We are investing in these technologies to create a better transport system, develop better technologies and create better experiences for users.

In 2019, we will face even greater challenges, but the opportunities that we see will also be greater. As long as we know our direction, access the situation clearly, are confident, forward facing, and make the right decisions we can seize the opportunities and grasp our future. If we make the wrong decisions or execute our strategy incorrectly we will set our brands into a death spiral. So, this will be a crucial year, testing whether we can develop sustainably or not. All of our work must relate to the automotive industry as Zhejiang Geely Holding Group remains automotive focused at its core, we must become globally competitive.

The 21st Century is a century of scientific and technological revolution, of industrial transformation, and of economic reshaping. It is emerging as a century of cross-sector integration, of resource sharing, of cooperation, and win-win partnerships. The bigger our circle of friends, the better our rewards will be.

In 2019, disruptive technologies will continue to sweep through the automotive and transportation industry. Change is coming from across the spectrum. In the world of Internet of Everything and with the increasing power of Artificial Intelligence chips, future vehicles will no longer just be a simple tool for transportation; they will become intelligent mobile computing hubs, intelligent storage centers with highly integrated on and off-line services, there is a need for wider solidarity and cooperation between automobile companies.

In 2019, all enterprises under Zhejiang Geely Holding Group will remain relatively independent whilst looking for synergies where opportunities for cooperation exist. I wish to restate that Geely is Geely, Volvo is Volvo, Lotus is Lotus, LEVC is LEVC, Proton is Proton, Polestar is Polestar, Yuan Cheng is Yuan Cheng. Each brand has their own place, with their own brand position, actively participating in the market, and striving to grow their market share. But in some fundamental analytical studies, technology undertakings, joint architecture and infrastructure development etc, synergies should be pursued as much as possible within the Group by sharing as much as possible, as a means to increase scale, reduce waste, and increase value to the end user.

In this era with thousands of brands competing, with millions of unit sales occurring each year, we must not become too conceited or overly proud, complacent, or get lost in our business methods. We can advance, and survive into the future only by conforming with historic trends, actively adapting to the times, and by correctly making adjustments, and developing on and off-line in terms of software and hardware.

The future is not for those who stand alone. Zhejiang Geely Holding Group is willing to participate in the transformation of the global automotive industry in partnership with all outstanding organizations, to find synergies across sectors, sharing resources, cooperating, forming win-win partnerships, in line with legal compliance, fairness and transparency, and taking into account the interests of all partners with the ultimate goal of providing users with even better transportation solutions and experiences.

Focusing on the future, not just on business development and industrialization, we will continue to place emphasis on the consumer and on their experience whilst remaining committed to sustainable social development, clean energy, environmental protection, safety, privacy, and other areas affecting people’s daily livelihood.

Fate rewards those who work hard. The years ahead may be completely beyond what you or I predict; the best way to grasp tomorrow is to create your own future. But we must not daydream, we must advance step by step, work hard with every task, turn dreams into reality, with success being rewarded to those who are resolute.

As the Chinese poet Yi Jing said “Everyone should constantly aim to become a better person, just as the universe continually evolves.” As we embark on the next stage of our strategic vision, I sincerely wish everyone happiness, health, and good fortune in the year to come.