Local producers are preparing to battle it out with the western superpowers as China's auto market gets ready to grow
China is the world's fastest growing car market. However, if you take a drive through its richest cities, all you are likely to see are foreign cars.
That wounded the national pride of 38-year-old Li Shufu, inspiring him to launch his own brand of compact cars: entirely Chinese-made.
The chairman of China Geely Group is working round the clock to take on the likes of VW, General Motors and their state-backed partners.
"Frankly speaking, Li Shufu is already a millionaire and doesn't need to work so hard to make money," said chief executive officer Xu Gang at the firm's car plant at Ningbo, in the eastern province of Zhejiang.
"But he wants to show foreigners that we can make cars. He wants Geely to be a beacon of strength for the domestic industry and keep overseas firms at bay," says Xu.
Li was China's 49th richest man last year with $110 million, according to Forbes magazine. He and three brothers from a small Zhejiang village founded Geely as a refrigerator components factory when he was 20.
The odds are stacked against Geely and other private companies in China. They don't have the government backing of a state enterprise, nor the brand recognition of foreign firms. But businessmen like Li are redrawing the Chinese corporate landscape. The one strategy nearly all have in common is price. Geely catapulted into the limelight last year when roaring sales of its cheap minis frightened bigger competitors into a price war.
China's only private car maker sells the cheapest compact in the country, a 38,900 yuan (€4,700) Haoqing hatchback, equipped with Geely's own engine and entirely locally-made components. Overseas brands tend to sell for at least 100,000 yuan.
While domestic carmakers have been criticised for the copying of foreign cars, analysts said Geely's was a hotchpotch of designs. For example, the front looks like a Benz, while the back resembles another domestic compact, Tianjin Xiali, which is built using Toyota technology.
Like many rising small companies, Geely aims for the hearts of bargain-loving Chinese. "I've often heard Li say a car is but two sofas, an engine and four wheels," says a Geely employee, one of about 4,000 who helped roll out 21,400 cars last year.
Chief executive Xu says he expects sales to double to 50,000 in 2002, and aims to raise capacity to 500,000 by 2005. Still, it takes guts to compete in China's auto market, already crowded with more than 100 domestic producers and the focus of all the big international names.
Nissan announced a billion-dollar foray into China this month, joining VW, GM, Honda, Ford and Toyota in targeting a market where car sales are expected to hit one million for the first time this year.
With global firms throwing resources into attacking the China market, analysts said Geely had to boost operations to survive. So Li turned his back on the Chinese tradition of passing the family businesses from father to son - and handed the keys to strangers this year.
He hired Xu, a former senior tax official, in May to devise strategy. Another outsider, 35-year-old Bai Yang, was brought in to manage Geely's auto unit last December, the first and only woman to head a car firm in China. Bai had to restructure Geely from the top down.
Li hopes Geely will rank among China's five top auto firms by 2005. "Foreign engineers, designers and workers are no smarter or more hardworking than Chinese. But when something goes wrong, they know where it went wrong," says Bai. "Li Shufu hired Xu Gang and me because he wants to turn Geely from a family business into a modern enterprise."
( - Reuters)