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Management Discussion and AnalysisTaxi vehicle manufacturing –Shanghai LTI51%-owned Shanghai LTI was officially establishedin June 2007 and is on track to start productionof the localized TX4 models by the end of 2008.To speed up the commencement of productionand to save costs, Shanghai LTI decided to rent anexisting manufacturing plant from Shanghai Maple.The factory modification was started in March 2008and is scheduled to be completed by mid-2008.Redesign and reengineering of the TX4 models forsubsequent production in the Shanghai facilities isprogressing on schedule. Key suppliers have beenidentified and contracted to supply major bodytooling and key engineered components. Selling andmarketing activities had already started in China,Asia and other international markets to develop thepotential markets for the TX4 models to be producedby Shanghai LTI. Encouraging responses have so farbeen received from a wide spectrum of potentialcustomers. Discussion also started recently on theopportunity for sharing of branding, technologies,operational knowledge, marketing strategy andservice expertise amongst MBH, Shanghai LTI andthe Company. Without revenues during the period,Shanghai LTI recorded a net loss of HK$5 million in2007, mainly due to the exchange loss incurred bythe company’s large cash balance of HK$375 millionat the end of 2007 as a result of the continuousappreciation of RMB againstUS$ and HK$.Manganese Bronze Holdings plcThe Group owns 5.7 million shares, representing22.83% stake in Manganese Bronze Holdings plc(“MBH”), the leading manufacturer of the distinctiveLondon taxies in UK. MBH’s shares are listed onthe London Stock Exchange. The Group’s stake inMBH was obtained in June 2007 by swapping a 48%stake in Shanghai LTI for the 5.7 million new sharesin MBH at a valuation of GBP2.5 per share. With its22.83% stake in MBH, the Group is one of the largestsingle shareholders of MBH and has been given twoboard seats in MBH’s board of directors. The Groupintends to hold the 5.7 million shares in MBH forlong-term investment purpose and will actively seekopportunity to strengthen the cooperation betweenthe two companies.In addition to its 48% stake in Shanghai LTI, MBHderives most of its revenues and profit frommanufactures and sales of London taxies in the UKmarket. MBH’s results for the 17-month period ended31 December 2007 were in line with expectations.Sales volumes in the final five months of 2007 weremaintained at similar levels to the equivalent periodof 2006 even though sales were abnormally high thatyear due to the dual effects of the run out of the TXIImodel and the initial launch surge of the new TX4model. MBH reported sales revenues of GBP144.5million and pre-tax profit of GBP4.9 million in the17-month period to 31 December 2007. Net profitattributable to shareholders was GBP3.4 millionduring the period.GEELY AUTOMOBILE HOLDINGS LIMITED17ANNUAL REPORT 2 0 0 7
Management Discussion and AnalysisThe Group started to equity account for MBH’sfinancial results in its consolidated financialstatements from 1 July 2007. Total dividend paymentfrom MBH to the Group amounted to HK$3.1 millionduring 2007.In MBH’s 2007 final results statements, the Board ofMBH expressed its confidence over MBH’s prospectsfor 2008, believing that the continuing appeal of theTX4, the effect of the Euro 4 emission regulationschange in London in mid 2008 and the strength ofthe demand for TX4 outside London will all havepositive impacts in 2008.46.8%-owned Zhejiang Geely, Shanghai Maple,Zhejiang Kingkong, Hunan Geely and Zhejiang Ruhoo(“operating associates”) remained the key earningscontributors to the Group, accounting for the bulkof the Group’s earnings in 2007. The operatingassociates sold a total of 181,517 units of Geely andMaple sedans in 2007, up 10% over 2006. Despiteincreased sales of new and higher-priced models likethe “2008 version of Free Cruiser”, “Geely Kingkong”and “Vision” during the period, this was partly offsetby the dramatic drop in the sales volume of the lowpricedmodels as the operating associates graduallyceased production of some of their low-end models.Vehicle manufacturing – ZhejiangGeely, Shanghai Maple, ZhejiangKingkong, Hunan Geely and ZhejiangRuhooUnit240,000220,000200,000180,000160,000140,000120,000100,00080,00060,00040,00020,0000YearAnnual sales volume of Geely andMaple sedans200 2,000 8,000 21,000199847,80076,27496,693133,041164,495230,000181,5171999 2000 2001 2002 2003 2004 2005 2006 2007 2008FGEELY AUTOMOBILE HOLDINGS LIMITEDDespite this, the continued improvement in theirproduct mixes towards higher-priced modelshad enabled the operating associates to recordsignificantly faster revenue and earning growthduring the period. In particular, “Geely Kingkong”,the Group’s key new product last year, hasreceived very good market response and achieveda tremendous success in 2007 with a total salesvolume of 34,337 units, up 220% from the previousyear, and become the second best selling modelsof the operating associates during the period.“Free Cruiser” remained the associates’ best sellingmodels during 2007, achieving 31% YoY increase insales volume to 68,258 units, or 38% of the operatingassociates’ total sales volume during the year,helped by the successful launch of 2008 version of“Free Cruiser” in October 2007. Although “Vision”,the associates’ most strategic new product in 2007,was only officially launched in May 2007, the marketresponse has been encouraging so far with a totalof 11,540 units sold in 2007. Monthly sales volume of“Vision” averaged over 2,200 units in the last quarterof 2007, suggesting strong growth momentum in theyear of 2008.18ANNUAL REPORT 2 0 0 7
Page 3 and 4: Supplying the SAFEST, the MOST ENER
Page 5 and 6: Financial Summary and HighlightsFin
Page 8 and 9: Chairman’s StatementLi Shu Fu,Cha
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Page 12 and 13: Management Discussion and AnalysisO
Page 14 and 15: Organisation Chart (as of 31 Decemb
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Geely Automobile Holdings LimitedRo
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