China's automaker Geely delays investment plan

March 29, 2006]


China's automaker Geely delays investment plan in Malaysia+

(Japan Economic Newswire Via Thomson Dialog NewsEdge)KUALA LUMPUR, March
30_(Kyodo) _ Chinese automaker Geely Automobile Holdings Ltd. is putting
its 100 million ringgit ($27 million) investment plan in Malaysia on hold
as it is unhappy with a new government policy requiring foreign carmakers
to export 80 percent of locally produced vehicles, the New Straits Times
reported Thursday.



Geely's executive director Lawrence Ang was quoted as saying the company
had decided last month to pump in at least 100 million ringgit to make
Malaysia its regional base, but the plan has been scuttled by the national
automotive policy announced last week.

Malaysia is the second biggest vehicle market in Southeast Asia after
Thailand, with annual sales at more than half a million units.

The new government policy aims to lure more foreign investment in
Malaysia's auto industry through various incentives like grants and lower
import and excise duties.

On the other hand, it seeks to ensure the survival of national carmakers
like the barely profitable Proton Holdings Bhd. which saw its local market
share eroded to some 40 percent from 60 percent over last five years due to
the influx of competitively priced models -- first from Japanese and South
Korean carmakers, and now from the Chinese.

Cam Soh Thiam Hong, executive of chairman of Information Gateway Corp. Sdn.
Bhd., Geely's Malaysian partner, said Geely is rethinking its plan because
the government has capped production for local consumption at 20 percent.

"Last time the requirement was that 70 percent of production output would
be for the domestic market and the remaining 30 percent for export. It is
now 20 to 80," Soh was quoted saying.

Another problem for Geely is the government's decision not to issue any new
manufacturing licenses until the overcapacity problem is addressed.

Soh said the two partner companies will meet with government officials soon
to clarify details of the new policy and its incentives.

Meanwhile, Soh said IGC and Geely are in talks to invest in an assembly
plant.

At present, a third party has been engaged to assemble Geely cars. The
first Geely CK1 sedans are expected to roll out as early as July, and an
upgraded version is to be launched by August next year.

The company's production target is 10,000 Geely CK1 per year but under the
new government policy, now only 2,000 can be sold for the local market.

Soh said the cars would be exported to some 40 countries.

IGC has the exclusive rights to assemble, manufacture, market and export
Geely cars to all right-hand-drive markets worldwide.

Besides Geely, Soh through his other company, Alado Corp. Sdn. Bhd., also
owns the franchise to import another Chinese brand, Cherry that is produced
by China's Automobile Co.

http://www.tmcnet.com/

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-pluto
.

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