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)