Yulon may team up with Geely to sell cheap cars

Yulon Motor Co, Taiwan’s largest automaker by market value, plans to team up with mainland-based Geely Automobile Holdings Ltd to build budget cars priced below NT$350,000 (US$10,600), hoping to boost sales, local media reported yesterday.

Yulon Motor is mulling over the idea of importing auto parts from Geely, which specializes in producing small budget cars, to be assembled at Yulon’s Sanyi plant in Miaoli, Taiwan's Economic Daily News reported Monday.

The locally assembled cars would be sold under Yulon’s brand through non-conventional channels, such as used car dealers, in a bid to differentiate from its existing distributional channels and cut distribution costs, the report said.

Citing unidentified sources, the report said Yulon planned to introduce various Geely small passenger cars in Taiwan. The cars would have engine capacities between 1,000cc and 1,500cc and prices between NT$163,000 and NT$260,000.

The budget car models would match Yulon’s goal to set its car prices at less than NT$350,000, with a gross margin of below 7 percent. If realized, Geely’s models would be the first mainland cars to be sold in Taiwan, it said.

Although the import of mainland cars is banned, an unidentified auto dealer said that no bans were imposed on auto parts. Also, the Taiwan government, abiding by its WTO commitments, has allowed more imported auto parts to be assembled in locally made cars, which increased the feasibility of Yulon’s plan to import auto parts from mainland China for assembly and sale.

The report also said that top Yulon executives including Kenneth Yan, chairman of parent Yulon Group, have already met and discussed the matter with Geely chairman Li Shufu during his visit to Taiwan early last month.

Geely Automobile, listed on the Hong Kong Stock Exchange, is a subsidiary of Geely Holding Group. Geely ranked ninth in the number of passenger cars sold in China last year, and second among own-brand automakers after Chery Automobile Co.

Geely sold an estimated 200,000 new cars last year, which was nearly equivalent to the total number of new cars sold in Taiwan during the same period, the report said.