Geely Targets to Become China's Largest Exporter of Cars

Geely Automobile Holdings Ltd. (175) said it aims to become China’s largest auto exporter in two years, overtaking Chery Automobile Co. (CACTZ) by focusing on expansion in developing countries.

The Chinese carmaker plans to open factories in Belarus and Uruguay this year, Gui Shengyue, chief executive officer of Geely, said in a Bloomberg Television interview in Hong Kong yesterday. 

“I am confident we will be able to become the largest Chinese exporter among the domestic brands in two years,” Gui said. Developing-market sales will lay a “foundation” for expansion into more mature economies, he said.

Geely, ranked ninth among Chinese auto exporters by 2011 shipments, would have to increase overseas sales more than fourfold to surpass Chery’s 158,900 units based on China Association of Automobile Manufacturers data. Geely, Great Wall Motor Co. (2333) and Warren Buffett-backed BYD Co. (1211) are turning to exports as slowing sales growth in China threatens to exacerbate overcapacity in the world’s largest vehicle market.

“It is relatively easy for Chinese carmakers to enter smaller emerging markets but these markets will not contribute very much volume,” Yale Zhang, managing director at Autoforesight Shanghai Co., said in a phone interview today. “In the longer term, they will still need to improve their quality to target bigger developed markets or break into larger emerging markets such as Russia and Brazil.”

Geely declined 0.7 percent to HK$3.07 as of the midday trading break in Hong Kong. The stock has climbed 81 percent this year outperforming the 14 percent gain in the benchmark Hang Seng Index.

Slowing Domestic Growth

China’s vehicle sales this year will probably miss their 8 percent growth forecast as the slowing economy and rising fuel costs curb buying, Gu Xianghua, deputy secretary general of the state-backed China Association of Automobile Manufacturers, said on March 20.

Geely, based in Hong Kong, is targeting to sell mid- to low-end cars in overseas markets, where demand is greater than in China, according to Lawrence Ang, executive director at the carmaker.

Chinese factories could build 40 million vehicles a year by 2015, outstripping domestic demand of about 27 million, according to the National Development and Reform Commission, the top planning agency.

Geely has said it is targeting to have at least half of its sales coming from overseas by 2015. Vehicle shipments overseas by Geely rose to 38,000 units in 2011, according to the industry association’s data. Chery, which has a joint-venture agreement with Tata Motors Ltd. (TTMT)’s Jaguar Land Rover luxury unit, was China’s top exporter last year.

Geely will probably win at least 10 percent of government orders for official cars in China, Gui said. He estimates the market to be between 300,000 to 500,000 units a year.