HANGZHOU - Following on the heels of its widely publicized bid for Volvo and government plans to encourage consolidation in China's auto industry, Zhejiang Geely Holding Group is again in the spotlight as it takes over a domestic special vehicle manufacturer.

The parent company of Hong Kong-listed Geely Automobile held a signing ceremony with Zhejiang Zhongyu Holding Group on Feb 26 to mark acquisition of Zhongyu Auto based in the capital of Zhejiang province.

Geely stated that it will "use Zhongyu's existing facilities and technology to develop and produce its own high-end passenger cars, multi-purpose vehicles and special vehicles to expand its product portfolio".

Geely President Li Shufu fenced with questions about how much the company paid in the acquisition, saying only that the deal involved complex transfer of shares - making the price hard to quantify.

He also noted that funding is important in an acquisition, but the correct strategy and feasibility of a deal are more crucial.

Zhongyu Auto was established in 2004 with a designed annual capacity of 25,000 vehicles.

It began cooperation with Daimler AG's Mercedes-Benz in the same year to make cars based on the German luxury carmaker's multi-purpose models Sprinter and Vito.

Geely's acquisition of Zhongyu is believed to be another step in its strategic transformation toward building more premium products.

Another move is its planned purchase of Swedish luxury brand of Volvo from Ford Motor, a deal expected to be finalized in the first half of this year.

Geely also launched the Emgrand as its own mid and high-end brand last year, offering two new models carrying the badge in an effort to change long-held consumer notions that Chinese carmakers produce only cheap cars.

The company plans to offer Emgrand's first large-sized sedan this year.

Geely also plans to set up a 350 million yuan ($51.5 million) technology center in the Xiaoshan district of Hangzhou neighboring Zhongyu's auto plant that will include a first-class crash test lab.

Geely's sales surged 48 percent to 330,000 units last year, ranking to finish the year ranked No 10 among domestic carmakers.

The company aims to sell 400,000 cars this year. Its mid-term outlook is to produce and sell 2 million vehicles annually by 2015.

(China Daily 03/01/2010 page18)