China Private Carmaker Geely Plans Listings

NINGBO, China, Aug 15 Tiffany Wu writing for Reuters reported that China Geely Group, the country's only private car producer, said on Thursday it plans to list on overseas and domestic share markets within two years to raise up to $120 million to fund an expansion plan.

As foreign car producers carve deeper inroads into the potentially massive China market, which some think will rival the United States as the world's biggest in less than a decade, small players like Geely know that rapid growth is the key to survival.

"In this industry, the faster fish swallows the slower fish," Geely's chief executive, Xu Gang, said in an interview at the firm's plant in Ningbo's Beilun development zone in eastern China.

"Relying on our own manpower isn't enough to seal the company's rapid development. So we must race down the road to the capital market," Xu said.

Geely, headed by legendary Chinese entrepreneur Li Shufu, sells the cheapest car in China, the Haoqing mini which has a 0.994 litre engine and costs a mere 38,900 yuan ($4,700).

It aims to raise annual capacity from the present 150,000 cars to 500,000 by 2005, an ambitious plan needing 800 million yuan in the next two years alone, Xu said.

China's youngest car manufacturer has enough money to fund half that investment and the rest would be raised through listing proceeds, bank loans and strategic investors, he said.

LISTING PLANS

"We are talking to a couple of global investment banks as well as domestic securities companies," the 41-year-old former Zhejiang provincial tax official told Reuters.

"The plan is to have two units listed domestically and abroad within two years," he said. The company planned to raise 800 million yuan to one billion yuan ($100-120 million) through the listings, he added.

Geely would also consider a back-door listing by taking over a publicly traded company, he said.

The group is one of many flourishing private firms in China, a sector mow the main engine for economic growth as lumbering state-owned companies grapple with bloated payrolls and poor management.

The group was founded as a family business by Li and his brothers in 1984.

It started out making radiators for refrigerators, moved on to making fridges, then aluminium sheets for construction before entering the car industry by taking over an ailing minivan maker.

Geely's core business shifted to automobile production after it obtained a licence to make passenger cars in November.

Despite competition heating up as China's entry into the World Trade Organisation last December meant lower import tariffs and ushered in more foreign cars, demand for Geely's cheap compacts still exceeds supply by far, Xu said.

It sold about 21,400 cars last year and the sales target is 50,000 this year. By 2005, Xu said annual sales should soar to 300,000.

Last year's profit was around 80 million yuan and this year's is estimated at 200 million yuan.

The group has now four compact models on the market after taking over Jmstar Group owned by Li's brother, Li Shutong, earlier this month. It plans to launch a sports car -- China's first -- in January 2003 and has other models in development.

Xu said the firm was interested in tying up with other car makers, either through a strategic investment or other business cooperation.

"Researchers have said that by 2005, China will have four or five major auto makers. We aim to be one of them," Xu said.