Geely founder: Zhongyu to boost R&D

• Source: Globaltimes
• [01:58 March 01 2010]
• Comments

By Chen Xiaomin

Zhejiang Geely Holding Group, in the midst of finalizing a deal to purchase Volvo and planning to boost its production capacity in northwestern Gansu Province, has acquired special vehicle maker Zhejiang Zhongyu Automobile, paving the way for a Geely auto technology center.

The deal was inked Friday evening via capital and asset swaps in Hangzhou, Zhejiang Province.

Geely's founder and chairman Li Shufu said besides helping Geely motor into the special vehicle market, the deal also provides facilities and land, which he said Geely will use to build a world-class technology center and the Zhejiang Auto Engineering College.

Zhongyu was launched in 2004 with a planned capacity of 25,000 premium multi-purpose vehicles and motor homes. It also makes special-purpose vehicles based on technologies developed by Germany's Daimler AG. The company has two production bases in Wuhan and Hangzhou.

Li said Geely would use Zhongyu Auto's existing facilities and technology to develop its own premium passenger cars, multi-purpose vehicles and special-purpose vehicles.

Geely's future technology system will center around Hangzhou, Li said, adding its auto research institute in Linhai, which was built in 2005, will remain unchanged.

The No. 10 automaker in China plans to build a leading crash test center with 2,000 staff members with an initial investment of 350 million yuan ($51 million) in Linjiang, Hangzhou.

It will also launch the Zhejiang Automotive Engineering College in Linjiang.

The technology center and the college will pump a steady flow of technical support and talent into Geely, laying a solid foundation for its future development, Li said.

Geely, spending 6 percent of its sales revenue on R&D, started in 2007 to transform its strategy from making low-end autos to making medium and high-end cars.

Since then, it has made a number of acquisitions and capacity expansions. It acquired the world's second largest automatic transmission producer, Australian Drivetrain Systems International, for A$70 million ($55.83 million) last June, and expects to sign a definitive agreement on Volvo in the first quarter and close the deal before June.

Li said Geely plans to run Geely and Volvo separately, adding the Zhongyu purchase has no relation to the Volvo deal.