Monday April 10, 2006

China's SAIC Motor Corp. planning to export own-brand vehicles

SHANGHAI (AP) - SAIC Motor Corp., a partner of both Volkswagen and General Motors in China, is gearing up to begin making its own brand of cars, aiming to begin exports to major markets including Europe by 2007.

The company recently invested 3.68 billion yuan (US$460 million; euro377 million) in a new unit, SAIC Motor Manufacturing Co., to handle its own-brand production.

It aims for an annual capacity of 600,000 SAIC-brand vehicles, including both cars and commercial vehicles, by 2010, said Zhu Xiangjun, a SAIC spokeswoman.

Most of the cars now made by SAIC are produced in its joint ventures with U.S. giant GM and Germany's Volkswagen AG, and all those cars carry the foreign partners' brands.

State-owned SAIC outlined details of its business plans Monday, part of the Chinese government's long-term push, initiated more than 30 years ago, to develop a domestic auto brand able to compete in international markets.

SAIC plans to use technology purchased from the Britain's MG Rover Group Ltd. to manufacture most of the cars.

It owns the rights to two Rover models, the 25 and 75.

SAIC executives credit the company's 20-year partnership with VW, and its shorter alliance with GM, for helping it cultivate the managerial skills and talent it needs to compete.

But the company is drawing heavily upon Rover's manpower for design and development, having hired more than 150 engineers from the former MG Rover's research and development center.

Plans for SAIC's new brand name and logo have not yet been announced.

SAIC does not own the rights to the Rover brand name, which are still held by former MG Rover owner, Germany's BMW AG.

SAIC plans to release two of its own models later this year, one a full-size sedan with a V6 engine based on the Rover 75 and the other a smaller, family-oriented model, said David Lindley, general manager of SAIC Motor Overseas (Europe).

He did not disclose details of the brand name and pricing for those models, which are already at the late stages of development.

SAIC's ambitious plans call for it to launch more than 30 other models of passenger vehicles, including full-size, compact and small sedans, hybrid and recreational vehicles, in 2007-2010, SAIC Motor Manufacturing's general manager, Wang Xiaoqiu, said.

"Bulk exportation to mainstream overseas markets including Europe will be realized in 2007,'' the company said in a statement.

The vehicles will be priced between 65,000 yuan and 300,000 yuan (US$8,000-US$37,500; euro6,600-euro30,700), it said.

SAIC Motor Manufacturing plans to invest an additional 10 billion yuan (US$1.25 billion;euro1 billion) to ramp up capacity by 2010.

The company's emergence as a major passenger car maker in its own right comes amid a revival for the fast-growing industry, already the world's third largest.

Automakers saw sales in China soar by 75 percent year-on-year in 2003, but growth slowed to 15 percent in 2003 and about 10 percent in 2004. It rebounded to 27 percent for full-year 2005.

However, the newly revived demand coincides with a prolonged decline in profit margins due to price cuts and rising costs for materials.

That pinch has hurt automakers like VW, which is staging its own comeback in China after seeing its market share plummet from over 50 percent in the mid-1990s to about 17 percent now.

"The next couple years are going to be really challenging for all of us,'' Weiming Soh, VW Group China's executive vice president for sales and marketing, said Sunday in announcing a new mid-size model for the Chinese market, the Sagitar.

Soh said VW supported SAIC's independent push into the market, though he acknowledged it will further boost competition.

"We would consider that we are healthy competitors,'' Soh said. "We need competitors.''

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