Geely rules out 2008 price cuts for sales target

Chinese car maker Geely Automobile Holdings Ltd will not cut prices this year despite slower growth in the country, the world's second-largest automobile market, its top executive said on Wednesday.

Geely is also confident it can achieve its sales target of 230,000 units in 2008, a rise of 27 percent from last year, despite a weak market, Chairman Li Shufu said. The target was set earlier this year.

China, long the world's fastest-growing major auto market, is one of the most competitive arenas on the planet. In past years, rival automakers from General Motors and Toyota to local players Chery and Geely have fought to expand market share by slashing prices.

Geely, one of the country's few homegrown automakers which began life by selling some of China's cheapest cars, is now trying to make more expensive vehicles to fatten up profit margins and the move has started to bear fruit.

"We are in the midst of a strategic transformation and we will only raise prices," Li told reporters. "We have decided not to make cars with sale prices of below 40,000 yuan."

Geely more than tripled first-half earnings to HK$261 million ($33.5 million) mainly due to increased sales of higher priced vehicles. It also exported nearly three times as many cars as it did a year earlier. here

Shares in Geely ended up more than 3 percent after the results, beating a 2.4 percent loss on the blue chip Hang Seng Index.

Geely's subsidiaries sold 106,948 vehicles in the first six months of 2008, up 27 percent from the previous year.

"The growth of China's car sales has slowed since the second quarter of this year but we will have new cars to launch in the second half, and that should help us to boost sales," said Executive Director Lawrence Ang.

Strong exports should also help Geely's sales for the rest of the year, Ang said.

Geely plans to launch an economy hatchback car, the Geely Panda, and a London Taxi made by a Shanghai joint venture with Manganese Bronze Holdings Plc later this year.

The firm exported 20,400 vehicles in the first half, with about half going to Russia. It aims to export 50,000 cars in 2008.

Overseas sales are expected to rise to about 20-30 percent of total sales next year from about 19 percent in the first half of 2008, Ang said.

The company said it outperformed the overall China market to post a rise in August sales, a month when nationwide passenger car sales fell 6 percent. But it did not give specific figures.

Geely said it will consolidate results from its five car making associates from July 1 after lifting stakes in the companies to 91 percent from near 47 percent.