Geely should focus on Cuban plant, not sales, to increase popularity with locals

By Chris Dalby Source:Global Times Published: 2016/11/22 22:03:39

The history of Chinese cars in Cuba is not as storied as their Russian counterparts, the only ones available during the Cold War. However, since Geely first entered the market in the 2000s, they have progressively become a common sight in Havana. However, despite economic reforms, Cubans still have mixed feelings about Geely and Chinese cars, in general. While the cars are popular in the tourism industry, they are imported from the Geely plant in Uruguay, making them too expensive for most Cubans.

Back in 2013, Geely announced its plan to build an assembly plant in Cuba, but so far nothing has materialized.

Then, the Global Times wrote that Geely "is now preparing to launch the SKD [semi knocked-down, or partly put together vehicle] project in a local place" in Cuba.

One can easily imagine the joy this must have caused in Havana. Foreign plants are thin on the ground and always have been. Cuba currently has a target of $2 billion in foreign investment a year. The country has rolled out a detailed investment portfolio, listing hundreds of opportunities in diverse sectors. In October, at the Havana International Trade Fair, a new portfolio included 395 projects worth over $9.5 billion. However, from May 2014 to October 2015, only 83 projects worth  $1.5 billion have been approved.

Given the crumbling state of Cuban vehicles, a Geely factory would be a major coup. It would at least attract the interest of global automakers who would never consider Cuba as a destination. However, since 2013, there has been little indication that any construction or development is under way.

Instead, Chinese companies seem to be focusing on sales. In March 2015, Geely signed a new deal to sell 2,000 cars to the government. The automaker proudly stated that it now supplied 60 percent of government vehicles. This was soon followed by BYD agreeing to provide 719 cars, mainly for the car rental industry.

Sadly, it seems aspirations to see Chinese cars being driven by the normal population or to manufacture them on the island have taken a back seat. While Cuba is in the midst of complex economic reforms, the country simply does not have the market or the knowhow to sell Chinese cars more broadly or to manufacture them.

The old alliance between China and Cuba might have made Beijing and Geely sentimental about the notion of opening a plant there. However, doing so would be arduous. The famed red tape of Cuba has put off more than one suitor. Regulations on paper are one thing, allowing a plant to be built under foreign ownership would be another. Training a local workforce would be costly, even if just for partial assembly.

However, these are not Geely's challenges alone. This year, it was announced that the first American company since 1959 would open a plant on the island. Pending final regulatory approval, Cleber LLC will begin building tractors next year. The hurdles it struggles with will serve as a blueprint for others.

Geely's plant might not be permanently dead, just stuck at a very long red light.

The author is a Mexico-based analyst of Chinese politics and economics.


blog comments powered by Disqus