Chinese car manufacturer Geely has announced it has plans to launch a new subsidiary to produce premium smartphones. In addition to manufacturing cars under the Geely brand for the Chinese market, Geely is also parent company to Volvo Cars, and it owns a majority stake in Lotus Cars.
The announcement that Geely intends to enter the smartphone sector makes it the first car manufacturer to diversify into the smartphone market. In justifying the decision, Geely chairman Eric Li said:
“There is a close connection in technologies within intelligent vehicle cockpits and smartphone technologies,” Li said in the statement. “The major trend in the coming future is to create user ecosystems across borders and provide users with a more convenient, smarter and seamlessly connected multi-screen experience.”
The new Geely smartphone venture will be funded with a 10 billion yuan ($1.55 billion) investment, with the aim of generating the same amount of revenue in its first year, and 150 billion yuan within eight years. However, these projections won’t be easy to achieve. Shipments of smartphones to China last year dropped 11% to 330 million units. Globally, consumers are taking longer to upgrade to newer models as improvements in performance and features are incremental. Yet according to Will Wong, who tracks China’s smartphone market at research firm IDC, Geely’s brand recognition in China should help it break into the premium smartphone market there.
As for global sales, it’s no surprise that Apple dominates smartphone sales of handsets over $400, with a market share of 57%, with Samsung a distant second on 17%. Given Geely’s limited brand recognition outside China, establishing a sizable market share globally won’t be easy. however we’ve seen the likes of Xiaomi manage it with handsets like the Mi 11 Ultra.
The news that a car manufacturer is diversifying into the smartphone sector may come as a surprise, but the opposite scenario – phone manufacturers entering the smart electric vehicle market – is much more commonplace. In March, Xiaomi reportedly announced it would enter the electric vehicle market and invest $10 billion over the next 10 years. Huawei and Foxconn have also entered the sector via partnerships, while Apple has reportedly been conducting research and development for a smart car of its own.