Geely joins China auto-makers' move to Mexico

MEXICO CITY — Geely Automobile, the independent Chinese automaker, is moving ahead with plans to construct an assembly plant in Mexico to supply both North and South American markets. Geely and a local partner will invest up to $270 million to build a factory in León, the capital of Guanajuato state in central Mexico.

Geely believes Mexico will provide a stepping-stone to achieve its ultimate ambition: conquering the U.S. market. Mexico offers a great deal of opportunity, not only as an export hub supported by competitive labor rates, but also an attractive market of about the same size as Canada's, with annual sales of 1.1 million vehicles.

The León plant eventually will have an annual capacity of 300,000 units and will create more than 2,000 new jobs. Geely expects the surrounding industrial park will attract up to a dozen major suppliers, bringing an additional investment of $230 million.

In the initial stage, Geely plans to invest $130 million over three years, ramping annual production up to 50,000 units. In the second stage, the company would invest another $140 million over two years, boosting capacity to 120,000 units. A third stage, after 2013, will take annual capacity to 300,000 units.

Geely isn't the first Chinese auto company to look to Mexico. First Auto Works has already announced plans to build an assembly operation in Mexico in partnership with Grupo Salinas, a multibillion-dollar Mexican retail and media organization.

A smaller Chinese truckmaker, Zhongxing Auto, also had planned to open an assembly operation in Mexico, but it is revising its plans after severing ties with its former U.S. distribution partner, Chamco.

What this means to you: A successful assembly operation in Mexico could provide Geely with a back door into the U.S. market.