Seonjin Cha and Irene Shen
Nov. 29 (Bloomberg) -- SAIC Motor Corp., China's largest automaker, will increase spending to make cars of its own design, heightening competition with its partners General Motors Corp. and Volkswagen AG.
The company will spend at least 20 billion yuan ($2.7 billion) to develop between 20 and 30 new models by 2012, President Chen Hong said at a press conference in Shanghai today. That compares with an earlier plan to spend 13.7 billion yuan by 2010.
SAIC Motor is moving up from being a low-wage assembler of overseas brands and is developing five platforms, ranging from recreational vehicles to compact cars. The carmaker has purchased technology from the U.K. and South Korea to help with its own designs.
``It will take SAIC three to five years to build its own brand and catch up with overseas rivals,'' said Wang Liusheng, an analyst at China Merchants Securities Co. in Shenzhen. ``SAIC Motor has competitive edge over its overseas rivals with lower costs in parts purchasing.''
SAIC Motor rose 3.4 percent to 24.34 yuan at the close of trading in Shanghai. The shares have almost tripled this year.
Car sales in China surged 24 percent to 7.15 million in the first 10 months of 2007 because of economic growth. The benchmark CSI 300 Index has more than doubled this year, fueling demand as more than three-fifths of Chinese stock-market investors buy new cars with their profits.
``China has become the most important market for all carmakers,'' said Wang. ``SAIC has great potential to develop in its own country.''
The carmaker expects group sales of more than 200 billion yuan this year, Chen said. The company is spending about 8 percent of sales on research and development.
The automaker expects to sell a total of 600,000 own-brand vehicles by 2010, including Roewe sedans.
SAIC Motor's parent in also in talks about a possible tie- up with Nanjing Automobile Group Co., the Chinese maker of MG cars, to expand its own-brand line-up.
``M&A is something you grasp when opportunities arise,'' said Chen. ``We'll continue to closely monitor market situations in China as well as overseas.''
To contact the reporter on this story: Seonjin Cha in Seoul at [email protected]
Irene Shen in Shanghai at [email protected]
Last Updated: November 29, 2007 05:36 EST