Auto expansion in China

Manganese Bronze has signed agreements with Chinese car manufacturer Geely Automobile Holdings and Shanghai Maple to hold equity in Shanghai LTI Automobile.


Manganese Bronze Holdings has signed agreements with Chinese car manufacturer Geely Automobile Holdings Limited and Shanghai Maple, an associate of Geely, to hold equity in a joint venture company, Shanghai LTI Automobile Ltd. (Shanghai LTI).



The venture, based in Shanghai, will produce four different vehicles: the London taxi, a limousine variant of the London taxi and two additional large saloon cars.



Total investment in the joint venture is forecast at £53m, which will be invested in press tools, body-in-white facilities and assembly operations. Geely will invest a further £33m in purchasing land and constructing buildings including paint facilities. These facilities will be leased to the joint venture.



The total investment in the joint venture of £53m will be funded from shareholders equity of £29m and bank loans of £24m.



Manganese Bronze will satisfy its 48% share of the joint venture by issuing 5.7 million new ordinary shares to Geely based on a valuation of £2.50 a share. Geely and Maple will respectively own 51% and 1% of the joint venture and will fund the balance of the shareholders equity of £15m.



Manganese Bronze will license its intellectual property to the joint venture, which is subject to regulatory approval in China.



Final assembly and sales of the London taxi, the limousine and the two saloon cars will be undertaken by Shanghai Maple which will have the right to sell the London taxi within Asia, while Manganese Bronze will have the right to sell the London taxi in the rest of the world. In addition, Shanghai Maple will have the right to sell the limousine and two saloon cars globally with the exception of the United Kingdom, which Manganese Bronze will have exclusive rights to.



The intended capacity of Shanghai LTI facility will be 40,000 vehicles with a single shift, with production planned to commence in mid 2008 subject to regulatory approval in China and shareholder approvals. The cost of producing the London taxi is expected to be significantly lower due to higher volumes and purchase of components from Geely’s suppliers.