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Geely targets UK for sales of upper-end vehicles
By Shao Shijie |
August 22, 2011, Monday
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Print Edition
Print Edition
GEELY Automobile Holdings Ltd, the Chinese owner of Volvo Cars, said it plans to start selling vehicles in the United Kingdom, making it the first private Chinese carmaker to enter the mature Western auto market.
Industrial analysts said expansion into overseas market has emerged as new focus to help make up for loss in the home market where China's home-grown carmakers continue to suffer from a slower growth rate and shrinking market share this year.
Zhejiang Province-based Geely said Geely International Corp has signed an agreement with Manganese Bronze Holdings Plc, the manufacturer of the distinctive London taxies, to distribute Geely's vehicles in the UK and provide after-sales service, according to its statement to the Hong Kong Stock Exchange.
MBH is 19.97 percent owned by Geely and also the venture partner of Geely for making London Taxies in China.
Both companies agreed to establish a project team to determine the scope of future distribution arrangements and a definitive agreement will be made if the business plan is finalized, the statement added.
If the plan goes through, Geely would be the second car brand to be sold in UK, following MG, which was acquired by China's largest auto group SAIC in 2006.
Major Chinese carmakers including Geely, Chery and Jianghuai Automobile are actively boosting exports this year as strong sales growth on domestic market hit the brakes in the industry-wide slowdown.
For the first seven months of this year, China exported 454,400 vehicles, an increase of 57 percent year on year. The growth outpaced the 3.2 percent increase for China's overall vehicle sales during the same period.
First-half sales of Geely increased 9 percent to 213,400 units. That included 13,300 vehicles sold on overseas markets, soaring 115 percent from a year earlier.
Most of the exports target developing countries as mature markets like the UK and the United States require high standards for vehicle safety and emissions control.
According to company insiders, Geely is expected to initially launch its Emgrand series in the UK after passing tests, however, Geely's intention to sell its higher-end passenger cars to the mature market was met with skepticism.
"It's not good timing to market the car in mature markets, where the economy has fluctuated and consumers' purchasing power is weakening," said Zhong Shi, an independent auto analyst.
"It's also about whether Geely's models would be mature enough to meet higher standards."
Besides the exports, Chinese carmakers are also hastening their expansion to overseas markets through mergers and acquisition and increased investments.
Last year, Geely acquired Volvo in a deal valued at US$1.8 billion.
A recent newspaper report said Geely plans to invest US$2 billion in Indonesia for a production base to meet demand in Southeast Asia; citing Budi Pramono, chief executive of Geely's local unit. The plant aims to roll out 30,000 units per year by 2014.
Jianghuai Automobile Co Ltd is also reported to be building a 100,000-unit manufacturing joint venture in Brazil with an investment of US$600 million.
Rising rising sales on overseas markets is crucial for Chinese auto makers to increase market share that has been eroded by accelerated expansion of international automakers.
In July, Chinese-branded passenger vehicles accounted for 36 percent of the total market, down 3.8 percentage points from a year earlier and 4.1 percentage point slower from June, according to the China Association of Automobile Manufacturers.
Industrial analysts said expansion into overseas market has emerged as new focus to help make up for loss in the home market where China's home-grown carmakers continue to suffer from a slower growth rate and shrinking market share this year.
Zhejiang Province-based Geely said Geely International Corp has signed an agreement with Manganese Bronze Holdings Plc, the manufacturer of the distinctive London taxies, to distribute Geely's vehicles in the UK and provide after-sales service, according to its statement to the Hong Kong Stock Exchange.
MBH is 19.97 percent owned by Geely and also the venture partner of Geely for making London Taxies in China.
Both companies agreed to establish a project team to determine the scope of future distribution arrangements and a definitive agreement will be made if the business plan is finalized, the statement added.
If the plan goes through, Geely would be the second car brand to be sold in UK, following MG, which was acquired by China's largest auto group SAIC in 2006.
Major Chinese carmakers including Geely, Chery and Jianghuai Automobile are actively boosting exports this year as strong sales growth on domestic market hit the brakes in the industry-wide slowdown.
For the first seven months of this year, China exported 454,400 vehicles, an increase of 57 percent year on year. The growth outpaced the 3.2 percent increase for China's overall vehicle sales during the same period.
First-half sales of Geely increased 9 percent to 213,400 units. That included 13,300 vehicles sold on overseas markets, soaring 115 percent from a year earlier.
Most of the exports target developing countries as mature markets like the UK and the United States require high standards for vehicle safety and emissions control.
According to company insiders, Geely is expected to initially launch its Emgrand series in the UK after passing tests, however, Geely's intention to sell its higher-end passenger cars to the mature market was met with skepticism.
"It's not good timing to market the car in mature markets, where the economy has fluctuated and consumers' purchasing power is weakening," said Zhong Shi, an independent auto analyst.
"It's also about whether Geely's models would be mature enough to meet higher standards."
Besides the exports, Chinese carmakers are also hastening their expansion to overseas markets through mergers and acquisition and increased investments.
Last year, Geely acquired Volvo in a deal valued at US$1.8 billion.
A recent newspaper report said Geely plans to invest US$2 billion in Indonesia for a production base to meet demand in Southeast Asia; citing Budi Pramono, chief executive of Geely's local unit. The plant aims to roll out 30,000 units per year by 2014.
Jianghuai Automobile Co Ltd is also reported to be building a 100,000-unit manufacturing joint venture in Brazil with an investment of US$600 million.
Rising rising sales on overseas markets is crucial for Chinese auto makers to increase market share that has been eroded by accelerated expansion of international automakers.
In July, Chinese-branded passenger vehicles accounted for 36 percent of the total market, down 3.8 percentage points from a year earlier and 4.1 percentage point slower from June, according to the China Association of Automobile Manufacturers.
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