Chinese automaker Geely Automobile Holdings Ltd. is set to become the first car company to join Shanghai's technology-focused STAR stock exchange with a $3 billion secondary listing, underscoring the sector's transition from heavy industry to one with digitalization at its core.

It's also a landmark moment for Geely and founder Shu Fu Li. The son of a farmer from eastern China and a trained engineer, Li tried his hand at photography, manufacturing refrigerators and making mopeds before establishing Geely two decades ago, just in time to capitalize on the boom in China's auto industry.

Parent company Zhejiang Geely Holding Group now owns Swedish brand Volvo Cars, almost half of Malaysia's Proton and Lotus, and the Polestar luxury electric car brand. It also holds 10% of Daimler AG, owner of Mercedes-Benz, and oversees Daimler's Smart compact brand via a joint venture between the two companies.

Geely ranks fifth in the Chinese passenger car market by sales with a 6% market share, behind frontrunner Volkswagen AG, then Honda Motor Co. Ltd., Toyota Motor Corporation and Nissan Motor Co. Ltd., respectively, according to consultancy LMC Automotive. Revenue jumped from 30.14 billion Chinese yuan in 2015 to 97.40 billion yuan in 2019, while operating profit increased from 2.73 billion yuan to 8.68 billion yuan over the same period.

The company has been listed on the Hong Kong stock exchange since 2005, debuting at HK$0.44 per share and rising to more than HK$16 this year. During its short history, its offerings have broadened from compact sedans, one of which, the EC7, previously topped the segment's sales charts, to chunky SUVs, its website says.

With STAR's focus on startups pursuing disruptive technologies, Geely hopes to enjoy the high valuations companies on this exchange attract, given the digital underpinnings of the future of the automotive industry. No date has been set for its listing, which is pending regulatory approvals, but rival China Evergrande New Energy Vehicle Group Ltd. has since announced its intention to follow suit and join the bourse.

"It's a little bit surprising that a car company is going to be listed on the STAR board. The auto industry has become way more sophisticated than before, and it's not only about assembly of different parts. It's also about clean energy and batteries in electric vehicles," said Ji Shi, automotive analyst at Haitong International Securities Co.

The company has stated that 40% of the proceeds of the IPO will fund research and development into cutting-edge technologies, which means it can keep more of its own cash for a planned internal merger between the Geely brand and Volvo Cars, Shi said. That combination could shift more of the responsibility for R&D onto the Geely brand in the Chinese car market, rebalancing a relationship in which Volvo has historically developed and shouldered the cost for technologies for the wider company, Shi added.

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Snapping up a struggling Volvo in 2010 in the wake of the Global Financial Crisis, Geely won plaudits for its hands-off approach, preserving the strength of a brand built on class-leading safety and durability. Volvo has shed some of the "boring" image that came with those attributes in recent years with racier designs.

The ambition of founder Li, who has amassed a personal fortune of $16 billion according to Forbes, has generated anticipation over Geely's future too.

"[Geely] is certainly one of the incumbents from China to become one of the global, leading manufacturers," said Christoph Sturmer, lead global analyst at PwC Autofacts, who added that the fierce competition and presence of heavyweight state-owned players makes China's auto industry "a shark tank" in which only the fittest survive.

"Their founder is a really amazing businessman. Geely is not run by a committee. It's run by an entrepreneur, and you see that by the swiftness and decisiveness of their actions because it's basically a one-man company."

Insert Lynk

While the Geely badge is well known in China and some emerging markets including Latin America, the name is beginning to gain prominence in developed economies as the parent behind some potentially significant new brands.

It now aims to make a splash in Europe with the recent launch of the Lynk & Co 01 SUV, which will be sold with hybrid and plug-in hybrid powertrains. The car, which launched in China in 2017, will be available for outright purchase and also via a novel subscription model that allows other users of the company's app to borrow a car when the main user makes it available, thereby reducing ownership costs.

Lynk & Co's close association with Volvo will likely help in the task of building a brand from scratch. With its unfamiliar name, the newcomer will need to gain recognition and trust in a market where buyers are already grappling with the complexity and financial merits of electrified powertrains under the hood.

PwC's Sturmer questioned whether the creation of the Lynk & Co brand would prove worthwhile or whether the group might find more success pushing out the brand's forthcoming products via Volvo, already a prominent name in the SUV segment.

"They have quite a lot of leverage in the European market. Why spend the money on building up yet another brand?" Sturmer said.

Seen from China, the brand may make more sense in a market where Geely wants to move up a notch from the products that have sown the seeds of its success, Morningstar automotive analyst Ivan Su said in an interview. In the domestic market, the company has positioned Lynk & Co to fit between Geely and Volvo in terms of price and prestige.

"Geely started out making affordable cars for people who were less wealthy, and that's definitely right, but as you've seen, the household income in China has grown quite significantly in the last decade. As people get wealthier, there will be a premiumization of demand," Su said.

"I think the strategy is that they want to premium-ize in China and introduce those premium products to overseas markets."

As of Oct. 26, US$1 was equivalent to 6.71 Chinese yuan.