Wednesday, June 07, 2006

Geely eyes Malaysian sales

By Gong Zhengzheng (China Daily)
Updated: 2006-05-26 08:55

Independent Chinese carmaker Geely Automobile expects Malaysia to further relax sales restrictions on vehicles it will build in the Southeast Asian nation, according to a top company executive.

In an interview with China Daily, Yang Jian, Geely's executive vice-president, said he hoped Malaysia would allow the carmaker to sell a bigger ratio of its locally-made vehicles in the country.

Under the current rules, the firm will be able to sell just 20 per cent of locally-produced vehicles in the country.

Geely will start producing cars in Malaysia from September with an annual capacity of 30,000 units, Yang said.

Geely, which is based in East China's Zhejiang Province and listed in Hong Kong, last May agreed with a Malaysian partner to assemble own-brand cars in the country.

However, Malaysia last November said it would require the carmaker to sell all of its locally-built vehicles abroad.

In March this year, Geely was informed it would be permitted to sell 20 per cent of its made-in-Malaysia cars in Southeast Asia's No 2 car market.

"The restrictions are unfair and discriminatory as they are only imposed on Geely. We hope Malaysia will raise the quota," Yang said.

Regulators from China and Malaysia will discuss the matter soon, he said.

At present, nearly 20 foreign automakers are assembling vehicles in Malaysia. In 2005, car sales in the nation jumped by 38 per cent year-on-year to 522,000 units. The country's top two home-grown brands, Proton and Perodua, control three-fifths of the market.

Benjamin Asher, a Bangkok-based analyst with consultancy Automotive Resources Asia Ltd, told China Daily that Malaysia wanted to protect its national car programme.

"Having only recently opened its doors to international brands, the market share for Proton and Perodua has plummeted.

"Although the quality of Protons and Peroduas are lower than international, mostly Japanese, brands, Chinese vehicles are still lower than that (the quality of Protons and Peroduas)," Asher said.

"But the Malaysian Government may still be concerned that Chinese makers will snatch up too much of the lower end of the market, thus reducing the domestics' share further."
However, many Chinese carmakers still want to assemble cars in Malaysia in a bid to branch out into the Southeast Asian market.

Earlier this week, Chery Automobile, another independent Chinese car producer, agreed with Proton to jointly study plans to make and sell each other's cars in China and Malaysia, and elsewhere in Southeast Asia.

Hafei Automobile and Chang'an Motor are also planning to build cars in Malaysia.
Hafei is a partner of Mitsubishi Motors. Chang'an runs car ventures with Ford Motor and Suzuki Motors in China.

Geely's Yang said the carmaker is also negotiating to assemble cars in Viet Nam and Russia.

The carmaker aims to sell 1.3 million cars overseas annually by 2015, accounting for two-thirds of its overall sales.

Last year, it exported 7,000 cars, up from 5,000 in 2004.

Meanwhile, the company's overall sales surged by half to 150,000 units.

Geely Automobile ended at 0.79 Hong Kong dollars (10.18 US cents) yesterday, down 1.25 per cent.


Chinese Automakers face inventory woes

Jin Jing
AUTOMAKERS in China face a difficult question of how to survive in a market that is oversupplied. Domestic sales expanded by double-digits in the past five year, yet auto manufacturers face tough decisions on whether to cut production in the world's most promising auto market as regulators are drafting rules to curb excessive investment in the sector. "China produced 2 million vehicles more than needed last year," said Ma Kai, the director of the National Development and Reform Commission early this year. "About 2.2 million units were being built while future plants will be capable of producing more than 8 million additional units." That potential production might be far beyond market demand as domestic vehicle sales were estimated to reach 9 million units by the end of 2010. Massive stockpiles would force carmakers to launch endless price wars to maintain competitiveness and in the process shrink profit margins. Not surprisingly, many domestic auto producers have shifted focus to exports, second-tier cities and niche markets to sell excess vehicles. China's auto exports are growing faster year on year and are expected to be a driving force in helping carmakers reduce inventories. With a cheap labor force domestic automakers have an advantage in bringing products under their own brand to overseas markets. Chinese models were 50 percent cheaper than those produced in Europe and 30 percent cheaper than Japanese and South Korean models. China's auto exports exceeded imports for the first time last year. The country exported 11,031 units more than it imported. Exports more than doubled from 2004 to 172,639 while imports dropped 8 percent, according to the Ministry of Commerce. Top exporters Last year, First Automotive Works Corp, Greatwall Automobile Corp and Jiangling Automobile Co Ltd were the top three exporters. Chang'an Automobile Corp, Chery Automobile Co Ltd and Geely Automobile Holdings Co also export vehicles. Growing exports could be a good way to not only help domestic automakers reduce inventories, but also build a strong international brand awareness of Chinese-made vehicles. So far, export vehicles were dominated by sports utility vehicles, trucks and minibuses. However, more and more companies were taking measures to bring sedans to foreign markets. Geely, one of China's leading private automakers, has aggressive plans to export two-thirds of its cars by 2010. Chery also aims to sell its cars on the US market as the first Chinese car to tap the largest car market. Geely, Chery and Great Wall - China's largest truck exporters - were building up sales channels and after sale networks to better support ambitious plans. Chinese companies also need to improve technology to meet higher standards for safety and emissions in developed nations. Chinese car manufacturers export most vehicles to developing nations. According to a drafted blueprint for China's auto industry in the 11th Five Year plan, exports of auto products are expected to increase 40 percent and volume is expected to reach US$7 million by 2010. The strategy calls for Chinese-made vehicles to account for 10 percent of the global auto trade in the following 10 to 15 years.