Geely sets profitability plan for new British acquisition

Geely Automobile Holding Ltd, the company's Hong Kong-listed arm, said on Feb 4 that it signed an agreement with Kandi Vehicles to set up a 50-50 joint venture for electric vehicles.

With registered capital of 1 billion yuan, the joint venture will engage in the investment, R&D, production, marketing and sales of low-speed electric vehicles on the Chinese mainland.

It later announced in Gothenburg, Sweden, that a R&D center that will develop modular-architecture designs and sets of components for C-segment cars - addressing the needs of both Volvo and Geely - is going to be established in Volvo's headquarters city and is expected to be operational by the end of the year.

Geely sold 63,000 vehicles in January, representing year-on-year growth of 67 percent, outperforming the Chinese industry's average of 46.4 percent.

Being one of China's most successful homegrown brand manufacturers, Geely's sales increased 15 percent year-on-year to 480,000 vehicles in 2012. It targeted 16 percent annual growth in sales this year to 560,000 vehicles.

Analysts were worried about the company's series of investments and acquisitions, which require strong finance support.

Statistics show that Geely has raised 3.7 billion yuan to finance its expansion projects inside China since it completed the takeover of Volvo in 2010.

However, "the company's profitability - 2.74 percent in 2010, 0.88 percent in 2011 and -1.89 percent in 2012 - indicated a continuous fade from 6.09 percent in 2009," said Han Jun, an auto analyst with Shanghai Brilliance Credit Rating & Investors Service Co Ltd.

"Even the weakening profitability is still based on the company's reliance on governments' rich subsidies.

"The low profitability may bring more challenges to Geely's future ambitions," Han said.

Contact the writers at zhangchunyan@chinadaily.com.cn and lifangfang@chinadaily.com.cn

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