In a sprawling factory south of Shanghai, Li Shufu, the self-made Chinese billionaire who is poised to buy Volvo Car Corp. from Ford Motor Co., is presiding over a new-model launch party.
His Geely Automobile Holdings Ltd., a publicly traded automaker that Goldman Sachs Group Inc. is backing to the tune of $334 million, is unveiling its first homegrown model designed for Western markets. The gleaming-white four-door compact, which retails for $11,700 to $17,600 in China, is called the Emgrand, a name made up to conjure grandeur.
In October, Ford named Geely Holding Group Co., Geely Automobile's closely held parent, as the preferred bidder for Volvo. On Dec. 23, Ford said the companies had agreed on most terms of the sale.
If any product illustrates China's place in the new economic order, it's the automobile. The country has averaged annual 10 percent increases in gross domestic product, the broadest gauge of its economy, since 1978 - growth that has helped turn a nation of bicyclists into a land of car-craving consumers.
China, with its 1.37 billion people, overtook the U.S. in 2009 to become the world's largest vehicle market, based on sales. The Chinese government projected that auto sales for the full year would soar 39 percent from the year before to more than 13 million vehicles.
Amid a global recession, the collapse of Detroit and trouble at Toyota, investors are wild about China's prospects. The country had 117 automakers at the end of 2008, according to the China Association of Automobile Manufacturers.
Geely saw its shares jump 573 percent on the Hong Kong stock exchange in 2009 through Monday.
BYD Co., maker of the world's first commercially available plug-in hybrid, an electric-powered car with a small gasoline engine for backup, attracted billionaire Warren Buffett, who bought a 10 percent stake for $232 million in September 2008. BYD shares surged more than fivefold in 2009 through Monday.
Shares of six other Chinese car companies, including SAIC Motor Corp., China's biggest domestic manufacturer, have at least tripled.
Now, spurred by the government, Chinese automobile companies are challenging Western, Japanese, and Korean rivals on the global stage. By 2015, China is aiming for 10 percent, or an $85 billion share, of the world's vehicle and auto parts sales, the Ministry of Commerce said in November.
"There's no doubt that 2009 marked the year that China became king of the automotive hill," says Michael Dunne, president of Beijing-based Dunne & Co., which advises fund managers on buying shares in Chinese automakers.
Still, there may be roadblocks. The most immediate threat would be if the government winds down its $586-billion stimulus at the end of 2010. The incentive package has given tax breaks and subsidies to more than 700 million rural residents, enabling them to buy minivans and light trucks for as little as $3,800.
Also, Chinese carmakers, including Geely, have not made inroads into developed markets partly because quality, safety, and brand recognition still lag behind rivals'.
In addition, the torrid growth rate may slow to 10 percent to 15 percent in 2010, according to SAIC and Volkswagen AG, which sells more cars in China than in its home country of Germany.
"This is a crucial time for Chinese carmakers," Dunne said. "What happens in the next six months will have a major impact on whether they will succeed or struggle."