The Little Car Company That Can?

When it came time for Geely Motor Co. to select a name for its newest compact, the auto maker's execs were clearly feeling cheeky, if not downright provocative. They called the 1.3-liter, four-door compact the Ulion, which loosely translated means "better than the Toyota Charade or the Buick Sail," two of the mainland's most popular economy cars. The in-your-face attitude doesn't end there. Bai Yang, Geely's CEO and the only woman running a local carmaker, says her company aims to become the "Toyota of China."

Before you start laughing, consider how far Geely has come in four years. Geely sold 200 cars in 1998, its first year as a carmaker. This year, Bai expects to sell more than 60,000 vehicles, or about 20% of the economy-car market, and to double revenues, to $300 million-plus. "I like this company a lot," says Yale Zhang of the Beijing-based consultancy Automotive Resources Asia. "They have a very good future."

Started by Li Shufu, an entrepreneur from Zhejian province, who still heads China Geely Group, Geely first made refrigerators, before moving on to motorcycle parts. In 1997, Li bought an ailing state maker of minivans, thereby gaining a license to make vehicles.

While it hasn't always been easy being China's only private auto maker--for years, state banks wouldn't lend it money--there are clear benefits. Unlike state-owned companies, Geely can keep costs down by firing inefficient employees. And the company is free of the heavy pension costs and debt of its rivals. Moreover, Geely can roll out new models without receiving permission from bureaucrats. The founder's tie to Zhejian is a boon, too; many of China's car component makers are located there. Finally, Li is said to have built up sizable cash reserves from his fridge and parts business--meaning the company has not been short of funding.

Geely's greatest impact so far: its decision to cut prices 11% late last year, forcing Toyota, VW, GM, and Ford to follow suit. Still, the company has a ways to go. Geely's cars are nothing fancy: The $10,000 Ulion is based on the outdated Toyota Charade. It's viewed as tinny and shoddy.

Bai is determined to improve quality. She is sending execs to learn from Toyota Motor Corp. (TM )--it supplies Geely's engines--and vows to pump $60 million a year into research and development. A domestic stock listing and a tie-up with a foreign auto maker are in the cards. "Perhaps we could even do a joint venture with Toyota," says Bai coyly. There's that attitude again.

By Dexter Roberts in Ningbo, China

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