Geely & Meizu – Cars not phones

I don’t think Geely is interested in smartphones.

• Chinese car maker Geely has acquired a majority stake in Chinese smartphone maker, Meizu, not to become a powerhouse in smartphones but to have control of the Android-based operating system that Meizu has developed and to use it in its vehicles.
• Meizu is a smartphone maker that has been majority-owned by Alibaba since 2015 where the idea was to use Meizu to deliver Alibaba’s digital ecosystem directly to users.
• However, it has never amounted to anything and in 2021 Meizu shipped just 0.7m units or 0.2% market share in China.
• Although it has had no success, Meizu has an asset which could be of great value to a car maker which is the Android-based operating system that it uses on its phones.
• This operating system uses the open-source portion of Android but instead of using Google Mobile Services, it puts its own services layer on top of it.
• Essentially, it is a proprietary OS that should be able to run Android apps that have been written for other versions of Android.
• In 2016, this was adapted for vehicles and Alibaba and SAIC made some announcements about using it in vehicles.
• This never seemed to go anywhere but in 2021, this idea re-emerged as Flyme for Car OS and there was speculation that this would be used in Geely’s EV Zeekr 001.
• However, for something as critical as this, I suspect that Geely felt that it needed to have control of the software and so it bought the smartphone maker from Alibaba.
• Alibaba is going through a refocusing of its business on e-commerce and so I suspect that it was a willing seller.
• The software in the vehicle is becoming crucial for car makers for unless they have a seat at the table when it comes to the delivery of digital vehicle services, they will earn no revenues from them.
• RFM research has long concluded that these revenues will be crucial for offsetting the lower vehicle shipments that will result from electrification and autonomous driving.
• This is why I think that this acquisition has nothing to do with Geely expanding into smartphones (see here and here) and everything to do with controlling the user experience and digital ecosystem in its vehicles.
• There has been little doubt in my mind for a long time that China will use a proprietary version of Android in its digital vehicles, but this is much less certain in Western markets.
• Here, many vehicle makers have switched to automotive-grade Linux which I think will be highly problematic.
• Volvo and Polestar (subsidiaries of Geely) have made positive noises about Google Automotive and have launched a vehicle (Polestar 2), but now I wonder whether Geely will push for all of its brands to use its in-house solution.
• This is how it can ensure that it can monetise both the digital vehicle services of its own and those of third parties which is what I think it needs to survive in the long term.
• Given how feeble Meizu’s impact has been on the Chinese smartphone market, I would not be surprised to see this shut down and all the focus go on automotive.
• Digital is Geely’s main long-term pain point for which Meizu may just be the panacea.