Sunday, April 09, 2006

China's SAIC plans 600,000 own-brand vehicles a year by 2010



ELAINE KURTENBACH
Associated Press
SHANGHAI, China - SAIC Motor Corp., a partner of both Volkswagen and General Motors Corp. in China, is gearing up to begin making its own brand of cars, with an initial target of 600,000 SAIC vehicles a year by 2010.
The plan is part of the auto group's overall plan to reach an annual production of 2 million units, for both passenger and commercial vehicles, by then, said Zhu Xiangjun, a SAIC spokeswoman.
Most of the cars now made by SAIC are produced in its joint ventures with GM and Germany's Volkswagen AG, and all those cars carry the foreign partners' brands.
State-owned SAIC was due to disclose key details of its plan to develop its own brand vehicles later Monday, part of the Chinese government's push to develop a domestic auto industry able to compete in international markets.
The newly announced target is much more ambitious than SAIC's 2007 annual production target of 50,000 own-brand vehicles.
Earlier this year, SAIC Motor set up SAIC Motor Manufacturing Co. to push ahead with the development of passenger cars with its own brand.
SAIC Motor Manufacturing has begun work on a factory originally meant to be used in its joint venture with VW, but handed over to the Shanghai-based manufacturer after the market slowed, reducing the need for an increase in capacity, executives at VW China Group and SAIC said.
SAIC has said it plans to use technology purchased from the Britain's MG Rover Group Ltd. to manufacture most of the cars. Plans for the company's brand name have not yet been announced.
The Chinese company owns the intellectual property rights to two Rover models, the 25 and 75. However, it does not hold the right to the brand name, which is owned by BMW, said Hawk Huang, an SAIC spokesman.
Rival automaker Nanjing Automobile Group salvaged MG Rover after it declared bankruptcy last year, and it remains unclear exactly what Rover technology it owns, said Hawk Huang, an SAIC spokesman.
Huang credited SAIC'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 in an increasingly competitive home market.
The company's debut as a major passenger car maker in its own right comes amid a revival in sales for the industry. Automakers saw sales soar by 75 percent year-on-year in 2003. Growth slowed to 15 percent in 2003 and about 10 percent in 2004, but 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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