A new car brand, codenamed L, will be launched by Geely next year, together with new L-brands and cars jointly developed with Volvo. (Photo : Reuters)
Chinese automaker Geely will launch a new car codenamed "L" next year, along with cars based on joint architecture developed with Volvo, Reuters reported.
The report quoted unnamed sources as saying that the new car brand will be launched with a sport-utility vehicle, the first model based on the Compact Modular Architecture (CMA) platform developed by Zhejiang Geely Holding Group and Volvo. A sedan is also said to be under development for the new brand.
Although the launching is seen an ambitious move at a time when China's economic growth is at its slowest, the report said that under chairman Li Shufu, Geely turned around Volvo's fortunes and beat the industry growth rate last year.
Last year, sales of Geely increased by 22 percent to around 510,000 cars while earnings tripled for Volvo, which predicted record sales for 2016.
According to the China Association of Automobile Manufacturers (CAAM), car sales are predicted to grow by 6 percent in China this year.
The source said that the launch would send Chinese-foreign venture brands, such as those produced jointly by General Motors and SAIC Motor Corp., to compete with L-brands, leaving Geely to go up against domestic Chinese brands and Volvo to focus on the luxury market.
"The last thing the Chinese automotive world needs is another brand," James Chao, Asia-Pacific chief of consultancy IHS Automotive, said. "The elimination of more brands in China should be the route."
Chao said it would cost hundreds of millions of dollars to launch a new brand and would require patience as well as a truly revolutionary product to succeed.
But if Geely can succeed, it could have substantial return, the report said.
Two years ago, Geely said it would eliminate three sub-brands and consolidate its sales network while selling only Geely products, but the new L-brand is a turnaround move for the company.
The source said that unlike in previous Geely sub-brands which were sold in separate dealerships, Geely's existing dealership network will sell L-brand cars.
Geely will also set up new factories to make cars for the new brand, with the aim to export them to other markets.
As part of Geely's plan to extend into European and U.S. markets, China Euro Vehicle Technology AB, which coordinates research and development with Volvo, is developing the CMA platform in Sweden. This will allow the three brands--Geely, Volvo and L-brand--to design new car models from a common base.
