Exclusive - Chinese automaker Geely gears up for push into Europe, U.S.

By Norihiko Shirouzu

BEIJING (Reuters) - Chinese automaker Geely is set to start producing a small crossover utility vehicle late next year - the first car to be built using a common platform jointly developed with Volvo.

The car - yet to be named - will hit showrooms in China in early 2017, several European markets a year or so later, and eventually the United States, said two senior executives, one of whom recently left the Chinese group.

The new car will be based on a common platform called Compact Modular Architecture (CMA) and engine technology that Zhejiang Geely Holding Group [GEELY.UL] has developed with Volvo Cars, the struggling Swedish automaker it bought from Ford Motor Co nearly five years ago.

Geely's cooperation with Volvo, a storied brand best known for its focus on safety, is seen as a possible model for Chinese companies trying to digest and manage acquired consumer brands. When Geely chairman Li Shufu pounced on Volvo, many doubted that a relative newcomer could turn around the loss-making, 87-year-old company while protecting its more upmarket brand.

"With the CMA car, Li wants to tell the world we're ready for the big time. We're ready to break into Europe and the U.S.," said one of the knowledgeable individuals, who didn't want to be named as he is not authorized to speak to the media about Geely's plans with the CMA platform.

NEW PLANT

Zhejiang Geely, which also owns black cab maker London Taxi Company, is building a new assembly plant in eastern China, which will eventually have the capacity to produce 150,000 CMA-based vehicles a year for both Geely and Volvo.

For export to Europe, the new plant's CMA-based small crossover SUV will initially be an alternative-fuel version. In China, Geely plans to sell a gasoline-engine version from early 2017, followed by a couple of alternative fuel variants, such as plug-in hybrids.

In targeting Europe with an alternative-fuel model, Geely wants to be seen as a maker of affordable high-tech cars rather than just another cheap, no-frills Chinese brand, the executives said, adding Geely plans a limited number of flagship showrooms in Europe.

"It's an effort to burnish our brand before we bring out more mainstream gasoline-fuelled cars to Europe and eventually to the U.S.," one of them said.

For now, he said, Geely plans to sell the new car in Spain, Portugal, Italy, Britain and Eastern Europe. "Those markets, Britain in particular, are open to foreign cars, while northern Europe, France and Germany are not."

Geely plans to unveil the CMA-based crossover at next year's Geneva or Beijing auto show, the person added.

The new car won't be the first Geely has co-developed with Volvo, though it will pioneer CMA. Geely recently launched its GC9 sedan in China, and is targeting emerging markets rather than Europe and the United States.

Volvo, meanwhile, plans to use the CMA platform to upgrade its small vehicles, producing them at the new China assembly plant and in Europe. Volvo didn't immediately respond to a request for comment.

           

BOLD GAMBLE

Buying Volvo has been a bold gamble for Li, 51, who a little over a decade ago proclaimed that cars were "nothing more than four wheels and two nice comfy sofas". He has since recognised there's more to it than that, and has overcome early Swedish reluctance to cooperate too closely for fear of diluting the Volvo brand.

In 2012, the Chinese firm brought in Carl-Peter Forster, an auto industry veteran with spells at BMW , General Motors and Tata Motors , in part to help convince Volvo chiefs to transfer some retired technologies and jointly develop the basics that will underpin a range of small cars, one of the two executives said.

The two firms agreed to set up a joint technical centre in the Swedish city of Gothenburg to develop common small-car platform and powertrain technologies. Geely also beefed up its expertise by hiring Volvo engineers and designers, including Peter Horbury, who co-designed the GC9 sedan.

The 'scalable' CMA platform can be stretched to accommodate bigger midsize cars, and will allow Geely to revamp most of its product line-up, including its Emgrand series. It will also help Geely plan the kind of bigger models it will need to attract buyers in the United States.

"We have had discussions with Volvo to see whether we could build a factory in the U.S. to assemble cars together," one of the individuals told Reuters.

(Editing by Ian Geoghegan)