A source familiar with the matter told VnExpress that the construction of Geely’s US$168-million plant in northern Vietnam and future investments would proceed as planned.

Company chairman and founder Li Shufu had said just last Saturday that the global automotive industry was facing a “serious overcapacity” and Geely had decided not to build new plants or expand production at its existing facilities, British news agency Reuters reported.

The Vietnam plant, a joint venture between Geely and local auto distributor Tasco, with the former holding a 64% stake, is scheduled to break ground this quarter in Thai Binh Province.

The 30-hectare plant will have a capacity of 75,000 vehicles per year in its first phase.

The initial models will be Geely and another Chinese auto brand Lynk & Co’s to meet domestic demand and export to countries that have free trade agreements with Vietnam.

In future the factory may expand to assemble more Geely cars.

All vehicles here will be manufactured from “completely knocked down” kits, which refers to cars assembled in one country using parts produced elsewhere.

The first vehicle is expected to reach Vietnamese customers early next year. In Vietnam Geely now sells its Coolray CUV imported from Malaysia.

Geely is one of China’s largest automotive groups, also owning brands such as Zeekr and Galaxy and holding stakes in premium Swedish brand Volvo. It has 22 factories in China and three abroad.

Geely is the second Chinese automaker planning to build a factory in Vietnam along with Chery.

Through its partner Geleximco, Chery aims to start construction in the third quarter, also in Thai Binh Province.

The Chery plant, which will build Omoda, Jaecoo and potentially other cars, has an investment of $800 million.

Two other major Chinese players, BYD and SAIC, have also explored the possibility of building plants in Vietnam but have made no progress so far.

Currently most Chinese passenger cars sold in Vietnam are imported from China, Thailand or Malaysia.

Last year the number of Chinese brands present in Vietnam reached 14, surpassing Japan’s nine for the first time. But their share remains modest compared to Japanese and Korean cars and domestic brand VinFast.