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Domestic carmakers try to steer own destiny

By Gong Zhengzheng (China Daily)
Updated: 2006-04-11 05:51

Chinese carmakers have long been riding on the nameplates of foreign companies or struggling to produce reliable brands.

But yesterday's announcement by Shanghai Automotive Industry Corp (SAIC) even though it is a joint venture partner of two global giants that it would branch out on its own to make cars signals a new trend of Chinese companies trying to make a distinct mark on the market.

SAIC's recently-formed unit, SAIC Motor Manufacturing Co Ltd, said that it plans to roll out 30 models from five platforms with a total investment of at least 10 billion yuan (US$1.2 billion) from 2006 to 2010.

SAIC Motor aims to sell more than 200,000 cars a year by 2010 both at home and abroad.

Beijing Automotive Industry Corp, which has joint ventures with DaimlerChrylser and Hyundai Motor, has also said that it plans to introduce its own cars by 2008.

SAIC Motor's product line will include medium- and-high-end sedans, sport utility, multi-purpose and recreational vehicles as well as compact cars.

"We will use our global resources to build international brands starting from medium- and high-end products," said Wang Xiaoqiu, general manager of SAIC Motor.

Parent company SAIC bought the technology of the Rover 75 and 25 models from the collapsed British carmaker MG Rover for 67 million pounds (US$117 million) in 2004; and paid US$500 million for a 48.9-per cent stake of South Korea's Ssangyong in the year.

SAIC Motor will launch its first product a large sedan based on the Rover 75 by the end of the year, Wang said.

He said the company would also use the engineering expertise of SUV-maker Ssangyong.

SAIC Motor has set up two research and development centres in Shanghai and Warwickshire, England with a combined strength of 750 Chinese and foreign engineers. The number will be eventually be increased to more than 4,000.

SAIC, which assembles Volkswagen and General Motors cars, had its own brands Phoenix and Shanghai but stopped their production in 1993 to make way for Volkswagen cars.

Wang declined to reveal brand names of the new cars.

"We have to be very prudent in naming our products. The central and Shanghai governments pay great attention to this regard. Our brand names should be accepted by both domestic and foreign customers."

SAIC is owned by the Shanghai municipal government.

The central government has been urging Chinese companies to develop their own brands and increase innovation capability to sharpen competitiveness in the world market.

"SAIC is the most capable among Chinese carmakers of developing own-brand cars as it is the strongest in talents, capital and management," said Yale Zhang, a Shanghai-based analyst with US auto consultancy CSM Worldwide Corp.

Since the domestic car industry is much weaker than foreign big names in development capability, the bulk of China's car market is controlled by foreign models and most Chinese-brand cars come into play in the low-end segment or have sluggish sales.

Geely and Chery, the two independent Chinese carmakers, produce low-cost cars with annual sales of each exceeding 100,000 units.

First Automotive Works Corp (FAW), the partner of Volkswagen, Toyota and Mazda, sold fewer than 20,000 units of its own brand the Red Flag last year. The Red Flag, launched more than four decades ago, is the oldest existing Chinese car marquee.

Brilliance China Auto, the Hong Kong-listed partner of BMW, reportedly sold merely 10,000 units of its own-brand Zhonghua sedans last year.

China's car market grew by 27 per cent to 3.1 million units last year, of which foreign brands had the lion's share of 70 per cent.

(China Daily 04/11/2006 page1)