Xu Gang, president of Geely, said Guorun Holding Co, an investment company listed in Hong Kong, will invest 400 to 500 million Hong Kong dollars (US$51.3-64.1 million) in a joint venture with the carmaker based in East China's Zhejiang Province.

Guorun will hold a 40-50 per cent stake of the expected joint venture according to their agreement of intent with Geely, Xu said. Geely will devote its 50,000-unit manufacturing base in Ningbo, a port city in the province, to the joint venture.

"The launch of the joint venture will be critical to the cash-starved Geely's expansion plan," Xu told China Daily.

Geely is owned by Li Shufu, one of the 100 richest Chinese, according to a recent Forbes magazine list.

The firm plans to increase its annual sales to 300,000 units by 2005 and to 1 million units by 2010. Last year, the company sold almost 50,000 cars.

Xu said Geely is also in joint venture talks with one of the world's "6 plus 3" automakers - General Motors, Ford, Toyota, DaimlerChrysler, Volkswagen, Renault-Nissan, PSA Peugeot Citreon, Honda or BMW.

But he declined to release the name of the would-be foreign partner.

All of China's State-owned auto companies have formed one or more joint ventures with the "6 plus 3."

Last December, Geely clinched two technical co-operation deals with an Italian company and a host of South Korean firms to help it design and develop car models and spare parts.

"The joint venture with Guorun will also represent Geely's first step towards its plan to ultimately get overseas listings," Xu said.

"We will possibly buy out Guorun's stake in the joint venture in the future," he added.

Geely aims to go public in Hong Kong and New York within three years, according to Xu.

The company will float stocks on the domestic market later this year, he said.

"As a baby in the auto industry, Geely is very wise to seek co-operation with foreign giants and listings to survive fierce competition," said Jia Xinguang, an analyst from the China National Automotive Industry Consulting and Development Corp.

"It is very weak in auto technical and development capability and does not have mass investment from the State," Jia added.

Geely will increase annual production capacity at its Ningbo plant to 150,000 units by 2005 at a cost of between 800 million (US$96.7 million) and 1 billion (US$120 million) yuan, according to Xu.

The company is also building a new 300,000-unit manufacturing base in Taizhou, also in Zhejiang Province, with a total investment of 4.9 billion yuan (US$592 million).

Geely has two other bases in Linhai in Zhejiang Province and Shanghai, which can produce 150,000 units a year.

The company plans to produce four new models this year, including the Meirenbao, the first China-made sports car launched last month. The car will sell for around 150,000 yuan (US$18,100).

Geely is also producing the Merrie, Haoqing, Jmstar and Ulion cars, which are all aimed at the low-end market segment of less than 80,000 yuan (US$9,670).

According to Xu, the company has named Nan Yang, former president of Shanghai Volkswagen, as its vice-president.

Nan, 52, will be in charge of Geely's car manufacturing, development and foreign and domestic co-operation activities.

(China Daily February 18, 2003)