Geely to move assets into listed company
Zhejiang Geely Automobile Group, the mainland's first privately held carmaker, has indicated its clearest intention so far to use mainboard-listed Guorun Holdings as its listed flagship.
Chairman Li Shufu said Zhejiang Geely planned to inject all its car production assets into Guorun. However, he did not say when this would be done.
Guorun was previously a software company, but it formed joint ventures with Zhejiang Geely on car manufacturing last year, effectively paving the way for car assets to be injected into Guorun.
Mr Li, who was speaking on the sidelines of the National People's Congress yesterday, has acquired an effective stake of about 20 per cent in Guorun. A company owned by Mr Li and three other investors owns about 60 per cent of the firm, which received shareholder approval this week to change its name to Geely Automobile Holdings.
Zhejiang Geely posted a net profit of about 500 million yuan for last year, of which 300 million yuan came from the car operation, Mr Li said.
The company made 81,000 cars last year and planned to more than double that to 165,000 units this year. It built 20,000 units in the first two months of this year.
The group will spend about one billion yuan to improve its facilities and build plants to manufacture new models.
Despite a recent announcement of price cuts, Mr Li said the company had no plans to further lower prices. 'Our prices are already as low as half that of competing Korean products,' he said.
Analysts expect the industry to see average price cuts of 8 to 10 per cent this year, after they fell by 8 to 9 per cent last year, as more new models come on to the market.
Geely, based in Zhejiang province, sells cars for between US$4,000 and $12,000 each, according to a Merrill Lynch research report.
The lower end of the passenger car market is subject to a higher risk of overcapacity as new entrants and existing producers jostle for market share by expanding production capacity aggressively.
Geely has about 3.4 per cent of the mainland's private passenger car market, which grew 75 per cent in sales last year to just under two million units.
