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London's black cabs gain mileage in China

  • Story Highlights
  • Manganese Bronze, London's struggling cab maker, in joint venture in China
  • Tie-up with Geely hopes to sell 4000 vehicles in foriegn markets
  • UK production now down to 12 vehicles a day and company is barely breaking even
By Michael Kavanagh
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Financial Times

Manganese Bronze, the maker of the classic London taxi and a former niche player in Coventry's once booming car-making arena, is now the last car company in the city and enjoys the curious status of being the biggest London-listed car maker by volume.

Maker of London's classic black cabs is linking with Chinese carmaker Geely.

Maker of London's classic black cabs is linking with Chinese carmaker Geely.

However, it is struggling with the recession. Production is down to 12 vehicles a day during a four-day week in the UK and is barely at break even.

Priced between £30,000 and £34,000, they are not cheap. Regulations such as the requirements of turning circles have helped protect the company's dominant supply position in recent years -- but it has suffered a fall of up to 40 per cent in demand during the past year.

In contrast to sluggish UK production, the company is working flat out to export the London cab internationally. With the start of commercial production and sales of the taxis in China by a joint venture with carmaker Geely, it pins its hopes on the London taxi becoming an affordable option for cabbies worldwide.

After an aborted attempt to set up a manufacturing and sales licensing deal with Brilliance China Automotive in 2002, Manganese Bronze turned to Geely in 2006. The Chinese automaker, which has become a 20 per cent shareholder in the company, has finally begun production of London taxis in a plant in Shanghai.

The joint venture, Shanghai LTI, in which Manganese Bronze holds a 48 per cent stake, hopes to sell 1,000 vehicles in China this year -- with expectations of a further 3,000 in territories beyond Asia such as Turkey, Saudi Arabia, Bahrain and Spain in the course of the next three years. Geely expects the average Chinese black cab to sell for about £10,000, with production costs as low as £4,000 on a production line capable of producing 40,000 vehicles a year. John Russell, Manganese Bronze's chief executive, does not claim demand will reach that level -- which is about 20 times the current sales rate in the UK market.

But he insists the taxis can find a premium niche among operators with millions of vehicles used as taxis and minicabs worldwide.

Mr Russell says: "If we were [only] a car company, making two or three thousand cars a year, we would have gone out of business years ago.

In London, taxi drivers, "hearing tales of doom and gloom" as they carried City bankers and hedge fund managers in the autumn of 2007 became lead indicators of consumer belt-tightening. They deferred new vehicle purchases, which now hover at about 2,000 units a year rather than the 3,000 that can be produced to meet peak demand.

Manganese Bronze -- which was also affected by an embarrassing product recall last year after a series of fires in its vehicles -- has responded by cutting headcount, pay and shifts. It plans a £9.4m placing of shares in June to shore up its balance sheet -- as it has slipped into the red.

If the UK business is fragile, there is no doubting the robustness of the black cabs that have rolled off the production line at Manganese Bronze's plant for several decades.

London taxis typically cover between 20,000 and 30,000 miles a year -- with annual mileages of 100,000 clocked up by some cabbies in far-flung parts of Scotland.

The average life span of a vehicle is 12-13 years with many taxis, often driven across shifts by different drivers, covering more than a million miles during their time on the road.

The company has found innovative ways to save money, says Mr Russell. "Two years ago, if you had stress-tested many companies for a 30 or 40 per cent fall in business, most would have predicted they could not survive," he says, acknowledging the "But businessses have adjusted and found innovative ways to save money, he adds -efforts from both shopfloor and boardroom.

In spite of the low Chinese production costs and production capacity, Mr Russell also insists he will maintain production for the domestic market in the UK. The joint venture should also see UK production costs cut as a result of components supplied by China.

"We can't stand on our own two feet without China," says Mr Russell, whose business cards are in English and Chinese characters. "We [have] always said the business is fragile."

But he adds: "There is significant value in being a UK producer.

"Can you imagine BMW and VW not producing in Germany? We need a UK manufacturing presence."

© The Financial Times Limited 2009

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