Geely Holding Group, the rising independent carmaker in China, says it will invest heavily in research and development (R&D) in coming years as part of efforts to achieve its ambitious sales goal.

 

Yang Jian, Geely's executive vice-president, told China Daily the carmaker based in East China's Zhejiang Province plans to spend 5 billion yuan (US$620 million) on R&D over the next five years.

 

From now to 2015, the firm's annual R&D input will account for 7 percent of its sales revenue on average, Yang said.

 

The R&D money will be raised from banks, the stock market and Geely's improving profits, he said.

 

In the first quarter of this year, the carmaker reaped 150 million yuan (US$18.8 million) in profits, tripling its figure of a year ago. Last year, its sales revenue jumped by 40 percent to 6.6 billion yuan (US$825 million).

 

The company has a Hong Kong-listed unit, Geely Automobile Holdings Ltd. Yesterday it closed at 0.77 Hong Kong dollars (9.93 US cents) per share, down 3.75 percent.

 

As a result of the planned R&D investment, Geely expects to launch 15 new cars under its own brand from 2006 to 2010, Yang said.

 

In the meantime, the company will also develop eight new engines and 12 new transmissions independently, he said.

 

Yang said Geely aims to boost its sales to 1 million cars a year by 2010, with 30 percent targeting the overseas market. According to a plan revealed last year, the carmaker aims to lift annual sales to 2 million units by 2015 with two-thirds sold abroad.

 

Last year its sales surged by half to 150,000 units, of which 7,000 were exported.

 

A lot of other Chinese carmakers have already announced bigger investment plans to develop own-brand vehicles.

 

Shanghai Automotive Industry Corp, the partner of Volkswagen and General Motors, plans to spend more than 10 billion yuan (US$1.2 billion) to develop 30 models under its own nameplates over the next five years.

 

First Automotive Works Corp, which runs car ventures with Volkswagen and Toyota, also plans to invest 11.7 billion yuan (US$1.5 billion) in independent development in the period.

 

Geely, once a motorcycle producer, entered the car industry in 1997. It mainly makes low-cost cars priced at less than 60,000 yuan (US$7,500).

 

"However, we will not stick to low-end cars for ever. We will enter into the medium- to high-end segment which is growing rapidly and still has room for price cuts," Yang said.

 

Last week the firm launched a Jin'gang sedan with engine capacity between 1.5 and 1.6 litres as the first of its new line-up planned for the next five years.

 

Retailing between 66,800 yuan (US$8,350) and 85,800 yuan (US$10,730), the model will go head-to-head with the Chevrolet Lova, Toyota Vios and Hyundai Accent, according to other Geely officials. The carmaker expects to sell 20,000 Jin'gang sedans this year.

 

To expand its production capacity, the carmaker is planning to build four new plants in China, Yang said.

 

These new factories, to be located in Zhejiang, Central China's Hunan Province, Gansu Province in the northwest and Shandong Province in the east, will bring a combined annual capacity of 220,000 cars initially to Geely, he said.

 

At present the carmaker has four plants in Zhejiang and Jiangsu with a combined capacity of 300,000 units.

 

Sales of made-in-China cars grew by half to 1.72 million units from January to April this year. More than half of them were controlled by foreign brands.

 

(China Daily May 31, 2006)