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BIZCHINA / Li Shufu

Li Shufu
(szdaily/chinadaily.com.cn)
Updated: 2006-03-27 15:20

Li Shufu
Age: 43
Birthplace: Hangzhou, Zhejiang
Company: Geely Group
Head office: Taizhou, Zhejiang
Main industry: Automobiles and motorcycles

Li Shufu is chairman of Geely Automobile Holding Co Ltd, a privately
owned carmaker in China. The company, whose name means "auspicious
benefit" in Chinese, began making cars in 1998. The carmaker, which
depends on its own development, produces the low-cost Geely Haoqing,
Merrie, Ulion, Meirenbao, Maple cars, Beauty Leopard and China Dragon.

Li, listed by Forbes as one of China's richest people, said Geely aims to
boost output to 2 million cars a year by 2015 from 100,000 units in 2004.
Of that, 1.4 million cars are expected to be exported or manufactured
overseas by then, Geely said.

In China's business circle, Li Shufu is a controversial person. His
daring thoughts, innovative ideas and unyielding personality astonish
many people who are comfortable with conventional conformity.

When he began to develop motorcycles, some thought he was destined to
fail, but he succeeded.

When he withdrew his sponsorship of a Guangzhou soccer team because of
shady referees, he faced pressure from many sides.

When he perservered with his dream of manufacturing cars, people regarded
him as mad. After all, a private company had never before entered the
industry. Nevertheless, Li broke into the industry. Although China's
entrance into the WTO benefited Li, no one can deny that his success
stemmed from his creativity and determination.

From refrigerators to motorcycles

Born into a farmer's family in Taizhou City, Zhejiang Province, Li, like
many others at that time, did not go to university. Rather, he started
his business in 1984 with 2,000 yuan given by his father.

He decided to make refrigeration components. The huge demand for the
components lured many investors, but most of them dropped out due to
technical problems. However Li did not retreat. He turned to experts and
big factories for core technology and set up his own plant. His products
sold nationwide and set him on his path to success. He was 21 at the time.

In 1989, the State began to regulate the refrigerator industry. Only
designated factories were allowed to produce refrigerators and related
components. As a result, Li, lacking the necessary licenses, was forced
to close his plant.

Later, he was shocked to see plants like Kelon and Midea become so
successful. He learned an important lesson -- if you give up easily, you
will never succeed.

In 1994, expensive imported motorcycles became very popular in China. Li,
noting the popularity, decided to produce motorcycles. However, according
to State policies, enterprises must get approval from the Ministry of
Machine-Building Industry (MMBI) before they can produce motorcycles. The
chances of a small private company getting approval were extremely slim.

None the less, Li went to MMBI seeking approval. He didn't even make it
past the front gate.

His next step was to go to Hangzhou and bail out a nearly bankrupt
State-owned motorcycle factory. Turning the factory around, Li oversaw
the successful development of a four-stroke engine for motorcycles.
Before long the Li's motorcycles were being sold in 22 countries,
including the United States, Germany and Italy.

In three years, the sales of Geely brand motorcycles ranked first among
the same type of motorcycles in China. Geely itself became the fourth
largest private company.

Li decided he was ready to manufacture cars.

The first Geely car

From his company, Li found three engineers who formerly worked for
automobile factories. He called them to his office and introduced them to
his idea of making cars. Li and the three engineers became Greely's core
research and development force.

After visiting automobile factories and colleges, Li came up with an even
bolder idea. Instead of simply manufacturing cars, he wanted to design
his own brand.

The finished cars, made with a toughened blend of glass, looked very much
like a Benz 320. But there was a major problem. The toughened glass
distorted very easily. The failure caused Li rearrange his plans. To
ensure the quality of his cars, he would have to make use of matured
techniques, platforms, technology and parts.

But not everyone took his dream seriously. Once Li went to ask the help
of a parts expert working for a Shanghai company. After hearing Li's
story, the expert turned his back on Li and left. Li waited for some
time, but the expert did not return to offer advice.

At last, the China FAW Group, the number one automobile manufacturer in
China, agreed to support Geely's research and development. But there were
problems concerning the production rights.

Li once again need approval from the MMBI. His business would need to be
approved for each type of automobile it wanted to produce. Permits for
car production were strictly controlled and therefore hard to get.

In 1997, a friend of Li's told him of a small automobile plant in Deyang
County of Sichuan, that produced compact cars. "That is it. Let's give it
a try," was Li's response.

He set up a joint venture with the Sichuan plant. He intended to produce
Benz cars but was rejected. At this point Li didn't have the necessary
licenses to produce any kind of cars. He designed several compact cars
based on a popular designs by Xiali. At long last, Li received MMBI
approval to produce automobiles.

One year later, Li acquired all the shares of the Sichuan Plant and built
his first Geely plant in Linhai City, Zhejiang Province. In August 1998,
the Haoqing brand compact cars were successfully produced. A year later,
he set up the second Geely automobile plant in Ningbo Economic
Development Area.

From struggle to success

When Li first became involved in the automobile industry, few of his
friends supported him. Government officials and experts said: You can not
afford an automobile factory; if you could affford one you would not find
a market for the your cars; the automobile industry is too competitive
for you to succeed.

Li turned a deaf ear to those arguments and stood his ground. He was sure
that China's consumers needed economic cars which big manufactories were
reluctant to produce because of the narrow profit margin.

The so-called big manufactories maintained a large production scale but
their high prices curtailed sales. Therefore they never realized a real
scale economy. They were inefficient due to high production costs and
relatively limited sales volume.

As a private company, Geely chose to begin in proper scale according to
projected sales. The initial production capacity was set to 25 thousand,
which reduced their preliminary investments and related expenses.

"Making cars is not as mysterious as people think. A car is merely four
wheels, a steering wheel and an engine. The level of technology used in
manufacturing cars is very high. It seemed to me that I just needed to
buy the technology and the parts, and pay for engineers," said Li.

In truth, it was not quite that easy. The government had never before
permitted a private company to produce cars. Therefore Geely could not
promote new products or even upgrade their compact cars. Furthermore,
consumers did not trust their prices which were considerably lower than
prices offered by State-owned or Sino-foreign companies.

Li had to go to various authorities to ask for permits so that his
company would survive. He once spoke to an official with great sincerity
saying, "Please let me try. It is my dream. I'll pay for everything and
take all the risks. Just give me an opportunity to win or lose on my own."

On October 30, 2001, 10 days before China entered the WTO, the State
Economic and Trade Cooperation Committee issued an announcement
recognizing a type of car Geely made. Geely became one of the national
production bases for cars.

Moreover, the reduction in the prices of compact cars made by State-owned
enterprises stimulated the market for Geely's cars. By the end of 2001,
Geely witnessed a dramatic increase in sales. The upward trend continues
into 2002.

(For more biz stories, please visit Industry Updates)

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