Manganese Bronze, the manufacturer of London's famous black cabs, has finally got the go-ahead for its Chinese joint venture.

The firm has announced it will invest £19.85m in a JV with Chinese car manufacturer Zhejiang Geely Holding Group to produce up to 20,000 taxis a year in Shanghai, starting in 2008.

Manganese
Bronze has been waiting for many months to get approval for a Chinese
manufacturing operation, which it paints as a bold strategic move to
drive down costs and open new markets.

However, the
well-reported problems of over-capacity in China's automotive sector
meant that the goverment's approval was a long time coming.

taxi.jpgInterestingly,
the UK firm is not putting up any cash. Instead, it is contributing
intellectual property rights valued at £5.6m, while the balance is made
up by the issue of new shares valued at £14.25m to Geely, giving the
Chinese company a 23% stake in the UK firm.

The deal makes a lot
of sense for Manganese Bronze, which knows the export potential of its
iconic black cabs — they come in other colours these days — has never
really been fully exploited.

As well as getting access to an
expanding market like China, the deal gives Manganese Bronze a low-cost
manufacturing facility to provide components for its London cabs.

Final
assembly of the vehicles will be done by Shanghai Maple, a Geely
subsidiary, which will also have the right to sell the cabs throughout
Asia. Manganese Bronze will sell them elsewhere. Geely and Shanghai
Maple between them control 62.4% of the venture, although Manganese
Bronze has the right to go back up to 50% by purchasing shares in the
JV from Geely.

As Citywire has pointed out,
giving the Chinese firm a sizable minority stake raises the obvious
question of whether Manganese Bronze is paving the way for a complete
takeover. It wouldn't be the first UK motor manufacturer to pass into
Chinese hands — see this EngagingChina post.

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