Geely, GB Auto Partner to Sell in Egypt as China Economy Slows

Geely Holdings Group Co. said will assemble cars for sale this year in Egypt and North Africa, a move that signals a shift to emerging markets as China's economy slows and automakers face mounting competition in Western markets.

The Hong Kong-based Geely, which recently bought Sweden's Volvo car and truck manufacturer, said Wednesday it would work with GB Auto SAE, Egypt's largest auto assembler, to build and sell passenger cars in North Africa beginning in the second quarter of this year.

The Wall Street Journal said the companies aim to build 30,000 cars annually within a few years and eventually produce 50,000 a year.

GB Auto will distribute Geely passenger cars in select high-growth markets across North Africa, starting with the launch of two models in Egypt in the second quarter of this year, the companies said in a cooperation agreement.

The move is a response to the growing number of exports from Chinese auto makers, as the growth of the Chinese economy begins to fizzle from its annual 10 percent growth over the past 30 years. By 2013, that percentage may shrink to less than seven percent annual growth.

In China, vehicles sales increased 2.5 percent in 2011, but that marked the smallest jump in more than a decade. According to the China Association of Automobile Manufacturers (CAAM), automakers sold a total 18.5 million vehicles last year.

Meanwhile, according to CAAM, exports of vehicles reached all-time highs. China exported 849,500 vehicles in 2011, up 50 percent from the previous year. Egypt, along with markets like Ukraine and Indonesia, are emerging as key emerging targets for Chinese automakers.

Geely's international sales increased about 76 percent last year to about 38,000. This year the company expects growth of more than 50 percent in international sales. It has also expressed the goal of selling one million vehicles overseas by 2015.

GB will aid that progress in Egypt, where its share of the Egyptian passenger car market amounts to about 32 percent. GB already produces and distributes Hyundai Motor Co. passenger cars from South Korea.

But risks remain in Geely's venture into Egypt. Last year, vehicle sales shrank 30 percent, according to the Automotive Marketing Information Council. That was due in large part to a sharp decline in sales of passenger car sales, which dropped by about a third. GB's sales only fell 19 percent.