Reducing its sales target, the carmaker is looking to cut costs to stay competitive Mainland carmaker Geely Automobile Holdings has cut its sales target for the year and adopted a more cautious approach to expansion plans because of a market slowdown. Demand has been affected by central government moves to tighten credit for car purchases and a price war that has led to the postponement of purchases in the expectation of even lower prices. Strong competitors such as Volkswagen's two joint ventures and General Motors have been slashing prices by between 8 per cent and 12 per cent to grab more market share. Executive director Lawrence Ang Siu-lun said Geely expected mainland car sales would grow 15 per cent to 2.3 million units this year, compared with the 32 per cent year-on-year growth in the first half. Geely had planned to raise annual output to one million units by 2007 from 80,000 last year. Its annual production capacity has reached 200,000 units but it expects to sell only 90,000 this year, down from its original target of 100,000. Mr Ang said his company had planned to spend about $1 billion a year over the next few years to expand capacity and improve its model line-up. 'Now we will be very, very prudent about investment in capacity expansion in view of the market slowdown,' he said. To cope with the price war that is squeezing margins, Geely will try to further cut costs. Mr Ang said Geely had lowered car prices by 8 per cent to 11 per cent in the first half to boost sales and had cut material buying costs by 7 per cent in the period to lessen the impact. 'We will renegotiate contracts with suppliers, hoping for a 6 per cent cost reduction in the second half,' Mr Ang said. Other measures designed to cut costs include a reorganisation of Geely's four car plants so that each will specialise in the production of a specific model, raising production volume and reducing unit costs. Geely ranked as the mainland's eighth-largest carmaker, with a market share of 4.9 per cent in the first half, compared with 4.1 per cent a year earlier. The company booked a net profit of $54.43 million in the first half, compared with $903,000 in the same period last year. Turnover increased 52.9 per cent to $23.88 million. No dividends will be paid.