China's Geely to consolidate brands and dealers to cut costs

SHANGHAI, March 7 Fri Mar 7, 2014 5:52am EST

SHANGHAI, March 7 (Reuters) - China's Geely Automobile Holdings Ltd, whose parent company owns Swedish carmaker Volvo, will consolidate brands and sales network to cut costs amid sluggish sales, the company's spokesman said on Friday.

Geely, controlled by founder Li Shufu, currently sells cars in China under three brands - Emgrand, Gleagle and Englon - but the company's new generation of vehicles will only carry the "GEELY" logo, spokesman Victor Yang said.

"When we launched the three sub-brands back in 2009, we were expecting rapid sales growth. But as sales are slowing, we want to concentrate our R&D and marketing resources to strengthen one GEELY brand," Yang said in a telephone interview.

The Hangzhou-based firm is in the process of consolidating its 900-plus dealer shops, which currently have exclusive rights to sell one of the three sub-brands, he added.

"We do not have an exact target number for dealers, but we will recruit competitive dealers and tide out the incapable ones," Yang said, adding consolidating its network has been going on, but the new brand strategy will speed up the process.

China's automobile market, the world's biggest, is rebounding with about 10 percent growth expected this year, but indigenous brands are losing market share amid competition from foreign rivals such as Ford Motor Co, Volkswagen AG and General Motors Co.

Chery Automobile Co and BYD Co Ltd have taken similar restructuring measures to focus their resources on fewer brands or sales channels that would help them save money in developing, manufacturing and marketing cars.

Geely has set a growth target of 6 percent this year by sales volume, a sharp slowdown from last year's 14 percent pace.

Its wholesale sales volume fell 47 percent in January from a year ago, which the company said was partly due to the ongoing restructuring of its sales network. Retail sales still hit a record that month, Yang said.

Geely shares have shed more than a quarter of their value so far this year, far trailing the benchmark Hang Seng Index , which has slid 3 percent.

In 2009, Geely launched what was intended as a "medium to high-end" brand of cars in China called Emgrand targeting business people. Shortly afterwards it created the Englon and Gleagle brands.

At the time, domestic carmakers sought to shore up their brand image and divided their product portfolio into multiple brands of low-end "no-frills" cars and more upscale, higher-image vehicles.

Gleagle was meant to be Geely's entry brand, while Englon straddled somewhere between Emgrand and Gleagle.

The approach may have worked for global automakers like General Motors Co and Toyota Motor Corp.

"But for most of those indigenous Chinese automakers it was still premature," said Yale Zhang, head of Shanghai-based consulting firm Automotive Foresight. "The fundamental competitiveness of cars by those companies was not good enough to make sense of the multiple-brand approach."

Geely's Emgrand, Gleagle and Englon-branded cars will still be sold over the next few years, but will be gradually phased out after new generations of cars are rolled out under the "GEELY" logo, Yang said, adding that the GEELY-branded flagship model will likely be launched early next year. (Editing by Kazunori Takada and Himani Sarkar)

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