Geely overcomes huge obstacles
( China Daily)
Updated: 2004-02-19 15:08

As one of the few independent car manufacturers in China, Geely has surmounted massive odds to secure a slice of the nation's highly competitive market dominated by State-owned enterprises and giant foreign car builders.

Geely, a motorcycle manufacturer based in East China's Zhejiang Province entered the passenger car market in 1998 at the behest of Li Shufu, its ambitious chairman.

But Li was widely regarded as a dreamer and his pet project was dismissed before it even got off the ground.

The car manufacturing industry was regarded as a no-go area for entrepreneurs lacking both the capital and pedigree of the sector's established players.

But none of that dampened Li's enthusiasm.

"I started seriously studying the car industry 10 years ago and I was convinced that there was enough room in the market for privately owned domestic manufacturers," Li says.

Li says that he has "devoted" his life to the development of China's car manufacturing industry. "The potential of this industry has no bounds," he says.

Li says that he has been involved in many businesses over the past 20 years, including making refrigerators and motorcycles. "Twenty years ago, most of the electrical home appliances and motorcycles were imported from abroad," he recalls. But now, "we manufacture these products ourselves," he says. In time, most of the cars sold in China will be manufactured by local companies too, he predicts.

According to Li, the foundations have already been laid for the development of a strong domestic car industry.

"We have established a sizable and well-developed car parts industry and we have a pool of highly motivated and industrious auto workers, engineers and managers," he says.

The future of the car industry depends not so much on foreign investment, but on the growth of domestic manufacturers, Li says. "The Chinese car industry cannot be subject to the mercy of multinational auto makers for much longer," he says.

"The belief that they are going to help develop our car industry is an illusion that needs to be abandoned," he says.

Though still small compared with other auto makers in China, Geely, which literally means good fortune, has managed to live up to its name.

The company sold more than 80,000 compact cars last year, making it one of the top 10 passenger car manufacturers out of more than 30 contenders.

The company says it plans to double its sales this year to 160,000 units. And the company expects to sell 2 million cars at home and abroad by 2015.

Geely is credited by industry analysts as having helped popularize car ownership by bringing prices down to levels unimaginable just a few years ago. Jia Xinguang, a researcher at the China National Automotive Industry Institute, said that Geely's strategy has "injected new vigour into the industry."

Geely also won praise from Jia for being the only Chinese auto firm working to establish a distinctly Chinese identity, while other Chinese car makers, although they are much larger, are merely assembling foreign models, such as Volkswagen, General Motors, Toyota, Honda and BMW.

But individualism, at least in the car industry, has its limitations. The development of a new car is a costly and time-consuming exercise, says Jia. "Without any outside support, Geely is much weaker than the big names," he says.

But Li remains unfazed, insisting that Geely is not opposed to co-operation with foreign car makers. Indeed, "we welcome co-operation as long as it complies with Geely's development strategy," he says.

For example, Geely will never get into a joint venture with foreign auto giants to assemble their brands, Li says.

Geely has forged two joint ventures of its own with its Hong Kong partner Guorun Holdings to produce passenger cars in Shanghai and Ningbo, a port city in Zhejiang Province. Guorun is an investment holding company listed on the Hong Kong stock exchange. The two joint ventures produce cars sold under the Geely brands.

Geely has, more importantly, gained access through Guorun to the Hong Kong capital market. Li owns 32 per cent of Property Glory, which has a controlling stake of 60.68 per cent in Guorun, which will change its name to Geely Auto Holding.

Geely's range includes four models of passenger cars, the Merrie, Haoqing, Ulion and Maple. Last year, the company launched a new model, the Meirenbao, literally meaning beautiful leopardess, which was hailed as the first Chinese-developed sports car.

These cars retail for between 33,000 yuan (US$4,000) and almost 150,000 yuan (US$18,000).

And the company is co-operating with car designers from Italy, Germany and South Korea in developing new models to be launched in the latter half of this year.

Li says the price of his company's cars is firmly within the reach of many aspiring Chinese car owners. "These cars are affordable to the average Chinese customer," he says. Geely is carving a niche for itself in the fiercely competitive market. "We are producing cars that the big companies do not want to produce," Li says.

The company's priority at the moment is to survive, Li says. He is confident that Geely will prevail because "we have great vitality and we know the market well enough to make the right decisions," he says.

The entry of more privately owned firms to the car market is one which Li welcomes, insisting that this will give his firm "a stronger say."

Many private firms, such as BYD, a battery maker in South China's Guangdong Province, are rushing into the lucrative car industry with aggressive plans, although government officials and analysts warn the industry is overheating.

Li predicted that China's passenger car market will grow by 50 per cent to more than 3 million units this year.

Car output in China exceeded 2 million units last year, up more than 80 per cent from 2002.

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