Geely to invest 2 bln yuan to expand its Lanzhou plant

Geely Automobile Holdings Ltd is eyeing the lucrative automobile markets in countries near China and said it would invest 2 billion yuan ($292.8 million) over the next three years to boost car manufacturing capacity at its Lanzhou plant in Gansu province.

The expanded plant, when completed in 2012, is likely to generate revenue to the tune of 10 billion yuan, said company officials.

The capacity of the Lanzhou plant would go up to 120,000 units from 50,000 units now, said the officials.

By making Lanzhou its strategic production base, Geely not only intends to tap markets in the neighboring countries, but also set up ancillary facilities in the region.

"We are looking at being the leader in the northwestern markets and are significantly enhancing our production lines, sales, technologies and services," said Geely Chairman Li Shufu.

Analysts said Geely's decision to focus on Lanzhou would be beneficial in the long run as the reduced logistics costs will help increase market share significantly in the region.

"Geely's target is to produce and sell 2 million cars by 2015, with half in China and half abroad," said Li.

The company has also set up manufacturing bases in Russia, Ukraine and Indonesia, while the Malaysian plant may start production soon.

Geely plans to have 15 overseas production facilities by 2015, said company officials.

Geely intends to sign the final agreement with Ford to take over its sub-brand Volvo before the Spring Festival and complete the transaction by May this year, said Vice-President Yin Daqing.

The company had acquired London's iconic black cab producer Manganese Bronze Holdings Plc in 2006, and Australian automatic transmission supplier Drivetrain Systems International in March 2008.

Last year, Geely's domestic vehicles sales surged 59 percent to 325,413 units, 30 percent higher than its own target.

However, its exports fell substantially last year due to the global financial crisis. It sold only 19,000 cars overseas last year, accounting for just 6 percent of its total sales, compared with 20 percent in 2008.