AUTOMOTIVE NEWS CHINA CONFERENCE

Geely chief: 'We are still an ant'

Chinese companies urged to focus on developing brands, talent, technology

BEIJING — Many U.S. dealers are eager to start selling Chinese cars, but Chinese automakers are not ready to start shipping them.

Frank Zhao, vice president of Zhejiang Geely Holding Group Ltd., says Chinese domestic automakers must craft compelling brands, retain talent and develop their own technology.

In 2006, Geely Chairman Li Shufu said his company aimed to sell cars in the United States by 2008. Geely has since backed away from that target. Zhao said Geely still had plans to export to the United States, but he declined to reveal any details.

At the Automotive News China Conference here last week, Zhao said Chinese automakers have made impressive strides in recent years. But they are still like ants compared to elephants, he said.

"We are still an ant, just a large ant," he said in a candid assessment of the domestic industry. In China, most passenger vehicles are produced by joint-venture companies of global and domestic automakers. The brands of the domestics have about one-quarter of the market.

Chinese brands are growing rapidly and expanding the number of products. Their design and manufacturing have improved rapidly, Zhao said.

Scrambling for technology

But the Chinese automakers' growth strategies are confusing, he said. They do not pay enough attention to r&d, concentrating only on getting bigger.

Instead of developing their own technology, Chinese companies are buying it.

"You can never get core technology through buying it," Zhao said.

Chinese brands have unique advantages on which they should capitalize, he said. Those include:

-- A cost advantage over foreign brands, though it is shrinking.

-- Local talent and familiarity with the market and consumer.

-- The ability to "stand on the shoulders of giants" — that is, learn from the foreign companies.

In 2007, Geely sold 184,176 units, up 4.0 percent compared with 2006.

For comparison, China's light-vehicle market in 2007 grew 21.0 percent to 5.23 million, according to Automotive Resources Asia, a division of J.D. Power and Associates.

Home-grown talent

Geely has a good distribution and service network, with more than 500 outlets in China and more than 200 overseas, Zhao said.

It also has its own r&d team. By the end of 2008, Geely will employ more than 1,200 engineers, Zhao said. By 2012, that will rise to 2,000.

Geely has developed its own technology, including several engines and a transmission. It has two cars whose powertrains can meet stringent Euro 5 emissions standards, Zhao said.

Tata Motor Co. in India sent waves through the automotive industry when it showed a small car that it said would cost dealers around $2,500. Since then, there has been much speculation about whether such an inexpensive car could be built in China.

Geely could produce a car that would sell for that little, Zhao said. But increasingly sophisticated Chinese consumers wouldn't buy it because it would be too basic, he said. 

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