CHINA AUTO NEWS

[HarleyEarl]

Michael J. Dunne From China, in no uncertain terms When it comes to Li Shufu, you can throw out images of inscrutable Chinese. The founder and chairman of Geely Motors makes no secret about his ambitions: “By 2015, Geely Motors will produce 2 million vehicles a year,” he declared this autumn. “Two-thirds will be for export.” Li comes from Zhejiang Province, a hotbed of capitalism located just south of Shanghai. Since the 1980s, Zhejiang farmers-turned-entrepreneurs like Li have made fortunes by exporting huge volumes of simple items like coat buttons, cigarette lighters, and even Christmas tree lights. For Li, cars are a natural step up from the more basic products. “Just like selling lighters, we’ll ship Geelys all over the world.” China’s car export industry today is still taking baby steps. Car exports will reach an estimated 28,000 cars in 2005, less than 1 percent of the nation’s total car production. Countries like Syria, Belgium, Egypt and Algeria - where car buyers are not the most fastidious lot - are the main importers of the Chinese cars. When the subject turns to Chinese exports, most people first think of Chery Automobile and its association with Malcolm Bricklin. But, Geely is the vanguard - at least so far. The company sold 5,000 cars overseas in 2004. This year, Geely will export 12,000 cars to more than 30 countries. Much of Li Shufu’s optimism is fueled by success at home. Sales through October were up 43 percent to 114,871 units. That volume is good for 4.7 percent share of the China market. By comparison, Toyota and Mazda are each at 4 percent and Ford has captured just 2 percent. Geely this quarter announced plans to open new plants in China’s less-developed interior provinces of Hunan and Gansu. This move is consistent with the company’s overall strategy to “build affordable cars for the masses.” Conquering overseas markets will not be as easy as the game at home. Geely met its first major setback just last month. Chinese press this week reported that Geely has been “clubbed over the head with a big stick” by Malaysia, its Southeast Asian neighbor. Earlier this year, Geely had built a green field plant outside of Kuala Lumpur at the invitation of the Malaysian government. But when the first Geely models - the Merrie and Free Ship - rolled off the line two weeks ago, Geely was forbidden from selling inside Malaysia. Authorities in Malaysia apparently fear that Geely products - with prices starting at $3,800 - would cut down Malaysia’s Proton and Perodua national cars at the knees. Geely was informed that it could use Malaysia as a base for production and export, but not for sales in the domestic market. “This is completely different from our original understanding of the rules,” said a Geely spokesman. Today, Geely management in Malaysia finds itself pacing around an idle plant. Geely is learning that to win overseas, you may need to satisfy two kinds of customers - both car buyers and the people who make the rules. Li remains undeterred: “There are always so many problems. But I never doubt the vision.” Michael J. Dunne is founder of Automotive Resources Asia, a market information company specializing in Asian car markets.