Geely sees potential in Emerald technology

Emerald Automotive finally secured serious financial backing last Friday when Chinese automaker Geelycompleted its acquisition of the British startup.

In 2011, Emerald proposed building hybrid cargo vans in Hazelwood, but it had difficulty raising money. Now Zhejiang Geely Holding Group, which reported $24.6 billion in revenue last year, says it plans to invest at least $200 million in the startup’s operations over the next five years.

However, the Chinese company’s immediate focus will be developing a British-made taxi, not a Hazelwood-built van.

Geely’s first step will be to partner with Emerald’s engineers to develop for London Taxi Co., which is owned by the Chinese company, next-generation taxis that meet new emission standards, said Geely spokesman Victor Yang. That engineering work is being done in Emerald’s U.K. office.

“We’re working to develop a lightweight, range-extended, new taxi,” he said. Under new rules announced in January, London will require new cabs to be capable of operating with zero-emissions starting in 2018.

And the start of U.S. production of Emerald’s cargo vans? “We do not have a plan yet,” Yang said.

The startup had been focusing its efforts on building lightweight delivery vans powered by a battery that’s recharged by a diesel or gas engine.

Emerald said it had picked the St. Louis area to build the vans due to its central U.S. location and access to an experienced automotive labor pool. Both Chrysler and Ford have closed plants here in recent years, which employed thousands of experienced automotive workers.

Three years ago, Emerald wanted to have an assembly line operational by 2014, but those plans were put on hold as the company sought private financing to pair with private capital and $5 million in loans from the Missouri Technology Corp. and the city of Hazelwood.

Emerald reiterated this week that a Hazelwood plant is still in the works, though the company isn’t saying when a plant may open.

The engineering work that’s going toward revamping the London taxis will simultaneously be used in developing Emerald’s t-001 low emission van, said Emerald spokesman Gary Marble, and that will allow Emerald ultimately to move forward with production.

Emerald is currently courting prospective customers in the U.S., including large cable, utility and service companies with large fleets, he said.

“By being a smaller scope production facility, we’ll be able to build specifically for the customer,” Marble said.

Several automakers are increasing their investments in the development of compact commercial vans designed for fleets, a segment IHS Automotive forecasts will grow in the next few years.

To compete with Ford Motor Co.’s Transit Connect van, General Motors last month said it’s partnering with Nissan on a new small cargo van, the 2015 Chevrolet City Express, designed to attract those seeking better fuel economy than a full-sized van.

So far, these vehicles don’t offer hybrid models. But once major automakers start to offer this option, smaller rivals will face tough competition.

“Small-business owners is what they’re targeting, as they’re looking for a way to save fuel costs,” said Morningstar analyst David Whiston. “If an upstart like Emerald can do it, larger OEMs with bigger pockets can do it, and the question becomes whether or not (Emerald) will.”

Still, Geely has global ambitions, and the Emerald acquisition could aid the company’s efforts one day to bring its sedans to the U.S., according to Namrita Chow, principal analyst with analytics firm IHS Automotive.

Geely has grown to be one of the largest automakers in China since it entered the car market in 1997. It’s grown its exports to several other countries and even built up a large European footprint when it bought Swedish automaker Volvo Car Corp. from Ford in 2010 and acquired the parent company of London Taxi last year.

So far, however, Geely’s operations don’t currently stretch to the U.S.

“Geely doesn’t have any access in the U.S., and this provides a foothold,” Chow said. “Geely is concerned about its future loss of market share (in China). Emerald already has loans in place to produce in the U.S., and that’s a major benefit to Geely.”

In January, Geely’s subsidiary, Geely Automobile Holdings Ltd., reported that it delivered 549,518 vehicles in 2013, a 14 percent increase from 2012, but below its target of 560,000 vehicles. Geely forecast its auto deliveries will grow by 6 percent this year — below the 8 to 10 percent industry growth forecast by the China Association of Automobile Manufacturers.

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