China's Geely Automobile Holdings will begin manufacturing vehicles in Malaysia from July, with 80 percent of the CKI sedans destined for export, reports said today.

Geely's local partner, Information Gateway Corp (IGC), said they planned to produce 10,000 of the low-cost CKI sedans, which will be marketed to 42 right-hand-drive countries.

"The cars will be assembled at existing plants but we are studying the idea of building a new plant in the eastern corridor, possibly in a year's time," IGC group executive chairman Soh Thiam Hong told the Star newspaper.

By mid-2007 Geely and IGC plan to produce a second model, the upgraded CKX which has higher quality interiors and a more stylish exterior, and is aimed at the tougher British and Australian export markets.

Malaysia has ambitions of becoming a regional auto manufacturing and assembly hub but faces stiff competition from neighbouring Thailand where analysts say the government has done more to attract investment.

Production hub

Earlier this month Malaysia unveiled a new auto policy with a string of measures including tax cuts aimed at boosting its competitiveness.

Geely announced last month that it was looking to invest RM100 million (US$27 million) to make Malaysia its production hub for the Southeast Asian market.

"Malaysia has a long history in the automotive industry," its executive director Lawrence Ang said at the time. "The country has an ample supply of auto parts and it is cheap compared to China; that is why we want to invest here."

Geely, established in 1997, is the first Chinese private company in the country's automotive industry which while growing very fast, faces major problems of over-capacity and price competition.