BIZCHINA / Li Shufu
Geely bids for MG Rover leftovers
By Gong Zhengzheng (China Daily)
Updated: 2005-06-23 05:58
Privately-owned Chinese mainland car-maker Geely Automobile yesterday
said it is in talks to buy British collapsed automaker MG Rover's moulds
and production equipment business, and intends to build cars in Hong Kong.
Hong Kong-listed Geely and MG Rover held negotiations on the moulds and
production equipment business in April, Geely said.
"Negotiations are at a preliminary stage and not related to a merger of
equity shares of MG Rover," Geely said.
Geely and MG Rover started to negotiate plans to form a joint venture
several years ago, but talks were suspended in the middle of 2004.
Shanghai Automotive Industry Corp, one of China's top State-owned
car-makers, withdrew from talks to merge MG Rover in April.
Also yesterday, Geely and Hong Kong Productivity Council - a
government-sponsored organization aiming to promote increased
productivity throughout Hong Kong business sectors - signed a memorandum
of understanding to collaborate in the development of the first
made-in-Hong Kong car, and concerning automotive components.
The car will be a mid-to-high-range model, Geely said.
The two sides will establish an auto parts research and development
centre at the end of this year in Hong Kong, which will be joined by Hong
Kong manufacturers, it said.
But Geely has not revealed investment in the auto project in Hong Kong.
"Upon successful implementation of this project, we will look into the
possibility of producing this new model in Hong Kong for export overseas,
or leveraging on the CEPA advantages, to introduce to the mainland
market," said Andrew Leung, chairman of the Hong Kong Productivity
Council.
CEPA, or Closer Economic Partnership Arrangement, started last year to
facilitate Hong Kong's exports to and investment in the mainland.
Li Shufu, chairman of Geely, said the Hong Kong auto project would help
the company explore more opportunities in the international auto market.
Song Bingshen, an analyst with Guotai & Jun'an Securities Co Ltd, said:
"There seems to be synergies between Geely's talks with MG Rover and its
auto development project in Hong Kong."
"If Geely gets MG Rover's moulds and production equipment, it is likely
to move them to Hong Kong to develop and build the planned
mid-to-high-range car," Song said yesterday.
MG Rover's moulds and production equipment will be very helpful for
Geely, a manufacturer of cheap cars which needs to move upwards in
product portfolios to expand its profit margins and have a better public
image, he said.
Geely, 60.68 per cent owned by Li, is producing compact cars in East
China's Zhejiang Province and Shanghai.
However, other analysts don't think highly of Geely's auto project in
Hong Kong.
Yale Zhang, the Shanghai-based analyst with US auto industry consultancy
CSM Worldwide Corp, said: "I cannot understand why Geely wants to make
cars in Hong Kong as the auto market is tiny and costs are much higher
there than in the mainland.
"On the other hand, I wonder whether Geely could have enough cash to buy
MG Rover's moulds and production equipment according to its current
profit-earning ability."
Geely's existing products include Haoqing, Merrie, Ulion, Freedom
Cruiser, Maple and Beauty Leopard, most of which retail for between
30,000 yuan (US$3,623) and 80,000 yuan (US$9,662).
Geely's sales grew by 23.3 per cent year-on-year to 53,710 cars in the
first five months of this year, said an official of the company.
The company said earlier that it expects to sell 150,000 cars in total
this year, up from 100,000 units last year.
Its exports rocketed by 150 per cent to more than 3,000 cars in the
period.
Geely aims to double its exports to 10,000 cars this year from last year.
At the end of last month, Geely clinched a deal with a Malaysian partner
to assemble its cars in the Southeast Asian nation.
Production in Malaysia will start later this year with components shipped
from China and will reach 30,000 cars next year.
Geely, once a motorcycle and real estate conglomerate, started to produce
cars in 1998.
It closed at 51 HK cents (6.56 US cents) per share yesterday, up 2 per
cent.
(For more biz stories, please visit Industry Updates)
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