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Investors tend to favor cars equities that make luxury brands with high margins, but they should consider alternatives such as Geely Automobile, which sells models of economic sedan, the largest market segment in rapid growth China for cars, according to a senior executive of the company.
We are the most aggressive player in the market in pursuit of price cuts and economies of scale strategies, executive director Lawrence Ang said.
partner Geely Automobile, Geely Holdings recorded sales of 80.065 vehicles last year formed two joint ventures last year between the two companies in Shanghai and Ningbo accounted for 43,365 of this figure total sales increased 67 percent over 2002 and gave Geely Holdings share of 4 percent of the Chinese market for sedan cars, ranking ninth among his peers.
Ang said that sales should double to 160,000 vehicles this year, with an ambitious target of selling 650,000 cars in 2007.
Geely Automobile, formerly listed in Hong Kong Holdings Guorun IT firm, changed its name last month after the formation of joint ventures with Geely Holdings based Zhejiang, a private manufacturer of sedans economy and sports cars.
It seems investors are turning to a stock offering exposure to low-cost car segment in China.
Geely Automobile shares earned 1 9 percent Thursday to close at HK January 06, a record 70 percent from a year earlier.
By buying the Hong Kong stock, investors expressed their optimism regarding continued growth in Geely Holdings, owned by tycoon Li Shufu and his brother, who sold his first car in 1999.
Investors should get a clearer picture of performance Geely Holdings when reports of the listed company in Hong Kong results this month for the first time since the joint venture was formed in May and November last year.
Geely Holdings and joint ventures in Shanghai and Ningbo also sell sedans prices cheap as 35,000 yuan 4227 US 05-46000 yuan, according to Ang, and cuts the price of at least some of its models every year.
Earlier this year, for example, prices 1 | 3 liter sedan economy, Merrie and Ulion brand, sold through two joint ventures were both reduced by 10 percent after component costs are fallen sales of both cars were up 60 percent to 70 percent year on year in January and February, said Ang, with operating margins remains about 12 percent, which is very spectacular compared to industry standards.
However, Geely Holdings combines the strategy of low-cost models, with an aggressive push to increase volumes.
The market share is relatively more important to us than short-term profit margin because the automobile industry of China will experience a downward trend in profit margins in the next two years, said Ang.
We need a critical mass Then we can lower our unit costs, leaving room for maneuver on prices.
Geely Automobile may expand its interests in China more through additional acquisitions Geely Holdings, said Ang.
Other assets Geely Holding is a car manufacturing plant in Linhai City, also in Zhejiang The factory has sold 36.948 sedan economy last year, accounting for the remainder of the total, targets sales of 65,000 units this year, it has not been trans-formed into a third joint venture with Hong Kong-listed Geely Automobile, which awaits the return on investment to improve the plant.
Otherwise, Geely Automobile may increase its interests in two existing joint ventures, once the Chinese authorities approve such an initiative, said Ang.
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