Tag Archives: SAIC

GM and SAIC’s Open Marriage

Further word from our man in Detroit about General Motors’ ambitions in China and its relationship with its joint venture partner, SAIC Motors. It is already planning to expand its dealerships in the country. Now it is hedging its bet on its international partnership with SAIC.

When that partnership was struck in 2010, it was talked up as a global one by which both companies could expand into emerging markets, though, it should be said, GM has always had internal reservations about extending what was a necessity in China in to a worldwide relationship. Nonetheless, GM dealers in some Latin America countries have been selling (a few) SAIC’s Wuling micro vans, for example, and Chinese-made Chevy Sails were exported to India and South America, and some models are being locally produced in  a GM plant there.

GM is now thinking more in terms of region-specific partners. In particular, it would work with PSA Peugeot Citroen in eastern Europe and Latin America, and SAIC just in Asian markets outside China.

SAIC and GM are discussing a manufacturing and sales joint venture in Indonesia we are told, with the intention of attacking Toyota’s 60% market share there. Yet that follows SAIC scaling back its participation in the two carmakers’ spluttering joint venture in India, and its choice of a local conglomerate, CP Group, in preference to GM as a partner in Thailand. Executives from both GM and SAIC have been quoted as describing the relationship between their companies as a marriage. It is looking increasingly like an open one.

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SAIC Sails Into India

In what may be a  preview of China’s manufacturing future, or at least a slice of it, SAIC Motor and its U.S. partner, General Motors, have started local production of the first Chinese-designed car for the Indian market. The two will start selling a version of SAIC’s Sail, seen above in a company handout picture, in India next month. Sedan and hatchback versions of the small car, already a popular seller in China, are being produced at GM India’s plant in Talegaon about 100 kilometers outside Mumbai. Production of a SAIC passenger van is due to start by the end of this year. SAIC has a 50% stake in GM India.

Foreign carmakers that have got a toehold in the difficult-to-penetrate India market have done so by having  a tight small car focus and country-specific models. South Korea’s Hyundai has found success that way despite being a late arrival in the  market. So, too, has America’s Ford now it has stopped reselling European models and launched its India-only Figo. GM had tried selling Daewoo-designed models in India but without much success, in part because they were more expensive than local competitors. SAIC not only brings a design but lower-cost manufacturing expertise.

One test for this particular step in Chinese carmakers’ tenuous steps in globalization is whether what works for car buyers in one of Asia’s two big emerging markets will work in the other. Another will be whether it is successful enough for SAIC to overcome GM’s caution about extending the partnership, a necessity in China, to a worldwide relationship.

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SAIC To Put An MG Saloon Back On Britain’s Roads, Drive Into Europe

It is scarcely the thunderous 1950’s police-car lookalike MGZB that Brits of a certain age will remember, but the MG6, seen above in a corporate promotional shot, is soon to go on sale in the U.K., the Wall Street Journal reports, returning a saloon from the storied British sports-car manufacturer to Britain’s roads for the first time in years. The marque is now owned by SAIC Motor, acquired via a tortuous route following MG’s descent into bankruptcy and SAIC’s own merger with NAC. SAIC’s home-market version of the MG6 has sold well in China; the 1.8-litre model of the hatchback going on sale in Europe will be tweaked to European tastes, as will a planned 1.9-litre turbo-diesel.

SAIC is also looking to break new ground for a Chinese carmaker in western Europe. Not only is it producing the car at Longbridge in Britain’s Midlands, it is setting up dealerships in the country, making it the first to have a distribution channel in Europe of its own, though it may also tap into the expertise of the global dealer network of its U.S. partner, GM, as it reportedly plans eventually to sell 40,000 MG6s a year in Europe.

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SAIC Stake In GM To Test Acceptability Of Chinese Investment In U.S.

What’s good for General Motors is good for, well, China these days, to mangle once more the oft-mangled quote of the company’s long-ago CEO, ‘Engine Charlie’ Wilson. The U.S. government bailed-out automaker is reported by the Wall Street Journal to be in discussion to sell 4% of the company to sovereign wealth funds and other foreign buyers as part of  next week’s initial public offering that will reduce the American public’s stake in GM to 35% from 61%. Among the latter group of prospective investors is Shanghai Automotive (SAIC), which is said to be in talks to take a 1% stake for around $500 million, though it could end up putting up to $1 billion into GM if that would get it better access to the U.S. car market.

Not, of course, that this would be the first Chinese investment in a well-known U.S. company, plus the stake is small, SAIC and GM are joint-venture partners and GM is the top-selling non-Chinese brand in China’s fast growing auto market. There is some industrial logic in the pairing when it comes to global sourcing and marketing, and for both companies perhaps some longer-term positioning benefits ahead of whenever the next round of global consolidation occurs in the auto industry.

Yet it would be a highly symbolic investment and comes when Sino-American relations over trade and investment are tetchy.  GM’s recent sale of a parts subsidiary in Michigan to Pacific Century Motors, a firm owned by the investment arm of the city of Beijing, passed relatively unremarked in the U.S. SAIC’s investment, should it happen, would not, especially in a political atmosphere where the Obama administration’s critics, newly encouraged by midterm elections success, try to make anything the administration touches politically toxic, and the GM bail-out already pushes plenty of  big-government hot buttons as it is.

This Bystander will be watching for the reaction if there is a backlash in the U.S. Ever since China National Offshore Oil (CNOOC) ran into a wall of American xenophobia that stopped dead in its tracks a bid for the U.S. oil company Unocal in 2005, Chinese firms have trodden gingerly when it comes to investing in any assets that have an American flag anywhere close by. We expect more self-assured steps this time.

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Shanghai Automotive Embraces General Motors

What’s good for GM is good for…China. The old saw needs amending following not just November when GM sold more cars in China than it did in its alleged home market but also since GM is to hand over majority control of its thriving Chinese car business to its partner Shanghai Automotive (SAIC) as the pair launch a new joint venture to crack the Indian market for small cars and micro commercial vehicles now dominated by the Japanese. The two already have a JV in South Korea.

While the switch in control of the Chinese JV, Shanghai GM, is being presented as an accounting move to let SAIC consolidate the JV’s earnings (it will buy a 1% stake in the jv for $85 million to give it a 51% stake), China’s carmakers seem to be picking Detroit apart piece by piece. Beijing Automotive Industry is considering bidding outright for GM’s Saab unit, now the Koenigsegg consortium bid, of which it was a part, has collapsed. Bank of China is reported to have set up a $3 billion line of credit for BAIC to finance a possible bid. GM’s Hummer division is being bought by Sichuan Tengzhong. Privately-owned Geely is reported to have lined up the financing for a bid for Ford’s Volvo car business.

The SAIC move is interesting because it is not just buying its way into foreign markets through acquiring distressed assets, but taking GM along with it to teach it the ropes. And nor does it have its eyes on the slow-growing developed markets but the rich promise of emerging ones.

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China’s Automakers Likely To Cross Taiwan Strait For Parts

Taiwan’s three largest auto parts makers, Tong Yang Industry, TYC Brother Industrial and Depo Auto Parts Industrial, are open to investment from the mainland, Bloomberg reports. China’s car makers would get core design and manufacturing technologies they lack as assemblers and Taiwan’s parts makers would get access to on of the world’s still growing car markets. SAIC and Geely, who have acquired auto technologies in the U.K. and South Korea and Australia respectively, would be the most likely be in the vanguard of investors. Beijing lifted its ban on Taiwan investment on April 29 (see: “First Cross-Strait M&A Deals Struck“); for its part Taipei is considering opening 65 industries to mainland investment.

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China’s Stimulus Package Helps GM

This Bystander always takes heart from stories of windfall successes for globalization. Bloomberg is reporting how Beijing’s efforts to stimulate domestic demand and spread growth into the countryside is helping the troubled U.S. auto giant, General Motors.

GM increased its sales of the minivans it makes in China with SAIC by 32% in the first two months of this year. This follows a cut in sales taxes on small vehicles and the introduction of 5 billion yuan in subsidies to auto sales in rural areas. Farm households which buy a first new minivan or light truck can get up to a 5,000 yuan subsidy, those replacing an existing vehicle can get up to 3,000 yuan.

GM has now upped its sales growth forecast for China to 5%-10% for this year, from 3%, not enough to offset the shrinkage of its home market, of course, but sufficient to have some American car industry executives to suggest China’s direct subsidies to car buyers should be replicated in the U.S.

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