Geely's Zeekr Take-Private Bid: Strategic Focus or Desperation in China's EV Price War?

The automotive industry's next chapter is being written in the boardrooms of Shenzhen and Hangzhou, where Geely's bold $2.2 billion bid to take its premium EV brand Zeekr private has sparked fierce debate. Is this a shrewd move to consolidate power amid China's EV price war, or a desperate bid to mask vulnerabilities in a slowing market? The answer hinges on valuation concerns, Zeekr's competitive positioning, and the ripple effects for Geely's sprawling portfolio.

The Undervaluation Controversy

Geely's offer of $2.566 per Zeekr share represents a 13.6% premium over its last closing price, but investors like CATL and Intel Capital argue this still undervalues the brand's potential. At the time of the bid, Zeekr's market cap was ~$7 billion, yet Geely's $6.4 billion valuation has fueled accusations of opportunism. Critics highlight Zeekr's Q1 2025 sales surge of 25% year-over-year (41,403 units) and its aggressive R&D investments in autonomous driving and battery tech.

Analysts note the offer's 3.3% discount to Zeekr's pre-announcement stock price reflects market skepticism about its ability to sustain growth amid BYD's dominance. This discount could signal investor doubts about Zeekr's ability to “fully surpass” BMW and Mercedes-Benz in China by 2025—a goal Macquarie still backs with a $38 price target, despite lowering it from $47.

Competing in a Price-War Battlefield

While Geely frames the bid as a move to streamline operations, the reality is that Zeekr is fighting for survival in a market where BYD's price cuts (up to 30% on some models) are squeezing margins. BYD's April 2025 sales hit 344,353 units, a 43% year-over-year jump, while Zeekr's April deliveries fell 15% year-over-year to 13,727 units—a stark reminder of its vulnerability.

Denza, BYD's premium sub-brand, is also nipping at Zeekr's heels. Denza's N9 SUV, launched in March 遑25, has already sold 10,000 units in two months, targeting the same luxury buyers Zeekr courts. With BYD's vertical integration and economies of scale, Zeekr's reliance on shared Geely infrastructure may prove insufficient to compete.

Risks to Geely's Broader Portfolio

The bid raises red flags for other Geely subsidiaries, such as CaoCao Inc. (preparing for a Hong Kong listing) and Polestar (threatening delisting). If the Zeekr deal alienates investors over valuation transparency, it could deter capital for future listings. Worse, consolidating control under founder Li Shufu's parent entity, Geely Holding, risks centralizing strategic missteps—a peril in a fast-evolving sector.

Investment Implications: Proceed with Caution

For investors, three takeaways emerge:
1. Valuation Pressure: Demand Geely revise the offer closer to Zeekr's $7 billion market cap. The current discount may reflect short-term pessimism, but overpaying now could lock in long-term losses.
2. Monitor BYD's Pricing Power: If BYD's price cuts trigger a broader margin squeeze, Zeekr's premium positioning may become a liability.
3. Watch Geely's Portfolio Synergy: Success hinges on whether Zeekr's tech (e.g., lidar-based driver-assist systems) can cross-pollinate with CaoCao and Polestar, creating a moat against BYD.

Historical data underscores the risks. When Zeekr's quarterly sales growth exceeded 10% year-over-year, a buy-and-hold strategy for 30 days yielded an average return of -4.84%, sharply underperforming the benchmark's 9.47%. The strategy also faced extreme volatility, with a maximum drawdown of -53.63%, reflecting its high-risk profile. These results amplify the case for caution: past performance suggests overpaying for growth spikes may lead to losses.

For now, investors should tread carefully. The data shows Geely's bet is high-risk but potentially rewarding—if executed with the precision of its best engineering. Until then, hold fire until the valuation gap narrows and the broader auto sector stabilizes.

Actionable Insight: Avoid Zeekr's shares until post-bid clarity emerges. Instead, consider BYD's stock (despite its volatility) for exposure to the EV market's dominant player. For Geely's stock, a wait-and-see approach is warranted until its portfolio strategy becomes clearer.

The EV race isn't over, but Geely's next move could decide whether it's a leader or a casualty.