China carmaker Geely eyes U.S. markets via Mexico

Chinese car maker Geely Automobile Holdings plans to enter American markets through a $500 million car assembly plant in Mexico, it said on Monday.

Its parent, Geely Holding Group, has signed a memorandum of understanding with a Mexican company to build an industrial park including a car plant that it hopes will be able to manufacture 300,000 vehicles a year.

Geely, which hopes to shake off its image as a purveyor of low-priced cars, is one of a handful of Chinese automakers eyeing America.

"The car-making project, if it materialises, will be executed by the listed company," Geely's chairman Li Shufu told reporters.

"It will have a total capacity of 300,000 cars a year and service all of North, South and Central America," said Li, one of the country's richest self-made businessmen.

Although the group has said it expected construction of the plant to start in early 2008, Li said the industrial park had not been finalised as the group is still in talks with the Mexican government, seeking more favourable policies.

"If we aren't satisfied with the policies, the project may not move ahead," said Li, who also controls Zhejiang Geely.

The investment will be Geely's largest overseas and the industrial park will host an assembly plant, auto parts suppliers and other businesses.

Listed Geely said last week it had obtained approval from the Ministry of Commerce to issue $206 million worth of new shares to buy a 44.19 percent stake in each of five affiliated manufacturing units from its parent. 

The move, which will lift Geely's interest in the companies to 91 percent each, will allow the Chinese automaker to get the five companies' profits and revenues on its books.

Its stock finished down 2.2 percent, lagging a 0.9 percent fall on the index .HSCE for Chinese companies listed in Hong Kong.

Geely hopes to sell 230,000 cars this year, rising to 2 million by 2015, about two-third on overseas markets.