SHANGHAI -- Chinese automaker, Zhejiang Geely Holding Group, will soon have a "flying car" in its portfolio. The company said on Monday that it has agreed to the purchase of U.S. startup Terrafugia that is making the world's first flying car for practical use by 2019, pushing the Hong Kong-listed shares in its subsidiary to an all-time high.
Terrafugia was set up by graduates from the Massachusetts Institute of Technology in 2006. The U.S. company has around 100 engineers, recently tripled in anticipation of fund injection from Geely. Although the company will be under the wing of the Chinese, it will maintain autonomy over its major research and development capabilities and production facilities, while looking to synergize with Geely in accelerating development.
Apart from the 2019 model, the company is also working on one that can take off and land vertically that it hopes it will be able to launch by 2023.
The price tag of the acquisition has not been disclosed, but Geely will acquire all outstanding shares and appoint three board members including Nathan Yu Ning, its vice president of international business. Chris Jaran, former managing director for Bell Helicopter China, was also appointed as a board member and will take over as CEO.
The deal has received approval from all regulators including the Committee on Foreign Investment in the United States, or CIFIUS.
"We started Terrafugia with a vision to change the future of transportation with practical flying cars that enable a new dimension of personal freedom," said Carl Dietrich, Terrafugia founder, in a statement. "Now as part of Geely Holding Group, I am confident that we can reach that vision and subsequent commercial success by utilizing the groups' shared global synergy." Dietrich will remain in the company as chief technology officer, a newly created position, after the acquisition.
Li Shufu, founder and chairman of Zhejiang Geely Holding believes that "Terrafugia is ideally positioned to change mobility as we currently understand it and herald the development of a new industry in doing so." He said in a statement that the investment "reflects our shared belief in their vision and we are committed to extending our full support to Terrafugia, leveraging the synergies provided by our international operations and track record of innovation, to make the flying car a reality."
The stock market responded positively to the news. Shares in Geely Automobile Holdings, the Chinese company's core Hong Kong-listed subsidiary, soared to an all-time high of 28.4 Hong Kong dollars, immediately following the announcement on Tuesday. It closed the day at HK$28.2, or 6.4% higher than Monday.
Francis Kwok Sze-chi, managing director at Freeman Securities in Hong Kong, told NQN: "Demand for 'flying cars' is promising in China where traffic congestions are chronic headaches."
Zhejiang Geely Holding Group is one of the remaining few private auto makers in China, founded in 1986. Now headquartered in Hangzhou, along with Alibaba Group Holding, the Chinese car company became gained fame worldwide after its acquisition of Volvo Car in 2010. Geely Auto is planning to enter the U.S. as early as 2018 with its newly launched "LYNK & CO" brand.
Nikkei Asian Review Business and Market News Editor Kenji Kawase in Tokyo and NQN staff writer Noriko Okemoto in Hong Kong contributed to the story.