Geely‘s founder and President Li Shufu said on Tuesday that the group will build more vehicles in Europe using existing plants owned by Volvo Cars.
The Sweden-based brand has been under the Chinese giant’s umbrella since 2010.
In a group interview at Volvo Cars‘ headquarters in Gothenburg, the Chinese billionaire warned of “very serious” overcapacity in the global car industry.
“I think the solution for Geely and Volvo is for us to utilise our common capacity to develop,” Li said, as first reported by the Financial Times.
In Europe, producing locally allows automakers to avoid the steep tariffs imposed on imported Chinese electric vehicles since late 2024.
Reuters had reported earlier this year that Ford Motor Co. and Geely were in discussions about potentially sharing European production facilities, with Ford’s Valencia plant in Spain identified as the most likely option.
Overcapacity
Li, who is also the Chair of Volvo Cars, said there were 17 major car manufacturers in China competing for market share, many of whom were loss-making or making very little profit.
Earlier this month, both Shanghai-based EV maker Nio and Guangzhou automaker XPeng reported reaching their first-ever quarterly profits.
In China alone, and according to the FT, experts estimate annual demand of about 25 million cars against factory capacity of 45 to 50 million.
While Geely was among the first Chinese groups seeking new markets, the carmaker would “never enter into a price war” in Europe and elsewhere, Li said — seemingly referring to competitor BYD.
Earlier this year, commenting on a report that BYD is running its factories at 50% capacity, Tesla‘s CEO Elon Musk said that “factories do great above 80% capacity, marginal at 60% and mega pain below 50%.”
Running a factory beyond its optimal capacity hurts profitability as fixed costs — like machinery, buildings, and salaried staff — are spread over fewer vehicles.
Last week, German-based Volkswagen Group‘s CEO Oliver Blume also commented on the topic, saying that “overcapacity costs money.”
Blume acknowledged that the company’s higher cost structure needs to be offset by greater productivity.
“Capacity will always be under scrutiny — not just in Germany and Europe, but also in China, where we’ve already adjusted our production network,” he added.
Chinese Rivals
Geely, which also sells internal combustion engine (ICE) vehicles, benefited from Beijing’s cuts in EV subsidies at the end of 2025.
Its sales in the first two months of 2026 overtook those of BYD, with Geely delivering 476,327 vehicles in January and February — a 1% year-on-year increase — while BYD’s sales fell 35.8% to 400,241 units.
The expiry of a full purchase tax exemption on new energy vehicles triggered a year-end buying surge that pulled demand forward and hit BYD particularly hard.
While domestic sales have been plunging, BYD’s international figures have steadily grown over the past year.
The company’s updated overseas guidance — raising projected deliveries from 1.3 million to 1.5 million vehicles — indicates a possible strategic shift toward focusing more on overseas markets.
BYD began trial production at its first European passenger car plant in Hungary earlier this year, with full production expected to begin in the second quarter.
Another factory is under construction in Turkey.
Plans for a third facility have been discussed, with both Spain and Portugal having been considered as potential locations.
Volvo Manufacturing Capacity
Volvo Cars‘ CEO Håkan Samuelsson stated on Tuesday that the company has enough spare capacity at its European plants to share with Geely Auto and other brands under its portfolio.
The automaker has manufacturing facilities in Sweden, Belgium, and Slovakia.
“We don’t believe that tariffs that we have today will go away,” Samuelsson said on Tuesday, referring to the higher tariffs the EU has imposed on EVs built in China.
He added that the group could also expand the use of common parts and modules across brands “without in any way jeopardising our brand.”
Earlier this week, Volvo announced that it would become the exclusive European importer for Lynk & Co, taking over the brand’s distribution, marketing, and sales operations on the continent.
Sharing Across Brands
According to Li Shufu, Geely needs “to strengthen all of the relationships between [the sister companies].”
“If there’s opportunity for collaboration or synergy, of course we welcome and embrace them.”
Geely Auto aims to increase global sales by 14% this year to 3.5 million vehicles, with an internal target to sell 750,000 units outside China, according to Bernstein.
In September 2024, Li outlined a new phase for the group defined by “consolidation” and “prudence” to survive intense competition.
That strategic pivot followed years of expansion in which Li assembled one of the world’s largest auto empires, acquiring Volvo Cars, Lotus, and Polestar.
The group has since been deepening technology and manufacturing collaboration between its companies.
In November 2024, Zeekr acquired a controlling 51% stake in Lynk & Co as part of an internal restructuring, with Geely Auto retaining 49%.
The merger was fully completed last December, when Zeekr was delisted from the New York Stock Exchange and became a wholly owned subsidiary of Geely Automobile Holdings.
Geely-backed Polestar announced on Tuesday that it would consolidate all global production of the Polestar 3 electric SUV at Volvo Cars‘ plant in South Carolina, ending manufacturing of the model in China.
Volvo‘s stake in Polestar will also double to 19.9% from 9.8% after it agreed to convert approximately $274 million in debt to equity.
Volvo’s Annual General Meeting
Volvo Cars held its Annual General Meeting in Gothenburg on Tuesday, where shareholders approved all proposals from the Board of Directors and the Nomination Committee, including a decision not to pay a dividend for the 2025 financial year.
Li Shufu was re-elected as Chairperson of the Board.
Natalie Knight, who served as Chief Financial Officer of Stellantis Group from 2023 to 2024, was elected as a new board member.
Mercedes-Benz veteran Markus Schäfer was also appointed to the Board, with his term taking effect on July 1.
The AGM approved a Performance Share Plan covering around 220 employees, linked to targets for EBIT, free cash flow, CO2 reduction per vehicle produced, and gender diversity, running through 2028.
Additionally, the Board was granted authorization to issue new shares of up to 10% of the company’s total share count, providing greater financial flexibility and supporting potential acquisitions.
Financial Results
The Board members and CEO were granted discharge from liability for their management of the company during the 2025 financial year, as is standard practice.
Earlier this year, Volvo reported that its fourth-quarter operating income fell by 51.1% to SEK 1.9 billion.
Additionally, global sales in January represented a new low since January 2022 — 47 months ago.
CEO Håkan Samuelsson attributed the results to EU-US import tariffs, the removal of US EV incentives, and pricing pressure across the industry.
Samuelsson, who led Volvo Cars between 2012 and 2022, returned as CEO in April 2025, as Jim Rowan left the company after three years in the role.
He was appointed to a two-year term following the company’s announcement of an SEK 18 billion ($1.89 billion) cost and cash action plan, which includes cutting 3,000 jobs and strengthening ties with Geely.
