Geely to invest USD5-bil. in setting up NEV production base in China
Geely Holding Group has signed an agreement with the government of Changxing County to set up a complex for new energy vehicles (NEV) in East China’s Zhejiang province, reports Yicai Global. The carmaker plans to invest over CNY33 billion (USD5.2 billion) in the project, which includes a CNY22 billion assembly plant for NEV with an annual capacity of 300,000 vehicles, a gearbox factory, and a CNY10 billion industrial park for auto parts. The project will be built in two stages, with construction of the first stage to begin in October.
Significance: NEV sales soared in China, particularly in the final quarter of 2017 as the impending change in the policies to remove subsidies for lower-range NEVs saw a strong pull-forward effect on demand. In 2017, NEV sales hit 777,000 units in China, a 53.3% year-on-year (y/y) increase, while production hit 794,000 units, up 53.8% y/y. The market share of NEVs, however, remained low at just 2.7% of the total market in 2017, and this was only a 0.9 percentage point increase from the market share in 2016. Within the NEV segment, pure battery EV sales hit 468,000 units in 2017, up 82.1% y/y, while PHEV sales were 111,000 units, up 39.4% y/y. Last year, the Chinese government was concerned about a sharp increase in the number of start-up firms that have been granted NEV production licences, which could lead to overcapacity in the market. As a result, it froze the issuance of NEV production licences in June 2017. The latest investment plans from Geely underline the scale of the company behind the move and will help in acquiring a share of the NEV market. In November last year, Geely announced investment of over CNY20 billion (USD3.02 billion) to develop a manufacturing base for NEVs in Xian.
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Nitin Budhiraja, Senior Analyst II at IHS Markit
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