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Chinese Car Maker Zhejiang Geely Holding Looks At Future

SHANGHAI April 22, Zheng Jin writing for Dow Jones reported that Zhejiang Geely Holding (Group), China's homegrown private automaker whose rapid sales last year grabbed the attention of foreign rivals, aims to be the country's top selling maker of economy model vehicles.

"Geely has made great achievements in the past year, but we aren't satisfied. Actually, we have higher objectives," company chief executive Xu Gang told Dow Jones Newswires in a recent interview.

The Zhejiang-based company aims to become China's top economy car maker in China by selling 300,000 units a year by 2005, Xu said. That would account for about 10% of the estimated car market in China by mid-decade. By 2010, Geely expects one million unit sales a year, doubling to two million by 2015.

"The demand for economy cars will keep rising strongly in the next five to 10 years in China. We are confident in the prospect of the market, and we believe no one can change the upward trend," Xu said.

Geely's ambitious plans could be worrisome to multinational automakers including Ford, General Motors, Nissan and Renault. Geely's range of cheap cars - its Haoqing model sells for under 30,000 yuan ($1=CNY8.28) - have already intensified the downward price pressure on China's overall market.

Concentrating on selling mini cars and compact cars in a price range under 100,000 yuan ($1=CNY8.28), Geely sold almost 48,000 vehicles in 2002, more than double the previous year's sales.

In 2003, the company expects to sell about 100,000 vehicles, doubling sales again. Already in the first quarter, its sales rose 85% year on year to 15,000 vehicles.

China's car market was previously dominated by luxury models preferred by government buyers and passenger sedans required for expanding taxi fleets. But that changed in 2002 with the mini and compact models becoming the fastest growing segment of the China car market.

With growing incomes and access to finance, these models have become the most easily affordable to China's emerging middle class.

To meet its targets, Geely plans to expand its production capacity in coming years through upgrading its existing production bases and building new plants, Xu said without elaborating.

Geely announced this month that it was forming a CNY200 million joint venture with Hong Kong-listed information technology company Guorun Holdings Ltd. to produce low-budget automobiles.

But the aggressive automaker said it won't use price as its main means of competition, contrary to what many analysts in the market may think.

"Price isn't the most important factor to China's potential car buyers now. Customers will consider the brand, safety, and functions first and then the price," Xu said.

Geely will attract more customers by adding more features while maintaining the same price, and would provide better service, he said.

"Our target is to make good cars affordable to ordinary Chinese people," Xu said.

Geely used this week's Shanghai Auto Show to move up a notch from the compact market into the sports segment with the launch of its Beauty Leopard model.

Beauty Leopard, which will be available in the market in June or July, will be priced about CNY168,000, Xu said.

Asked about a law suit against Toyota Motors Corp. (J.TYM, TM) involving a trademark dispute, Xu said he was confident Geely would win.

Toyota, which has a joint venture with First Auto Works in the northern city of Tianjin, asked Geely in November to change a logo it was using on one of its cars.

Toyota argued the similarity to its logo could create confusion. When Geely refused, Toyota filed a lawsuit in December.

"Our logo and Toyota's logo reflected two totally different concepts...we haven't received the notice for a court hearing yet, but we believe we will definitely win the lawsuit," Xu said.