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SAIC plans to spend $1.25B to expand into other markets; will use technology from foreign partnerships.
April 10, 2006: 8:14 AM EDT

SHANGHAI (Reuters) - Top Chinese car maker SAIC Motor Corp. said Monday it would spend another $1.25 billion to fuel its ambition of selling its own brand of cars globally, putting to use technology gleaned from its foreign partners and Britain's collapsed MG Rover.
Having churned out Buicks and Santanas at ventures with General Motors Corp. (Research and Volkswagen AG for years, SAIC set up a $460 million unit in February to make self-developed cars later this year based on MG Rover technology acquired from the failed car maker.
SAIC joins fellow Chinese car makers Geely Automobile Holdings Ltd. and Chery Automotive Co. as they aim to follow other Asian car makers such as Toyota Motor Corp (Research and Hyundai Motor Co. onto the global scene.
With the new investment of 10 billion yuan, SAIC's subsidiary would add five production lines to build 30 new models by 2010, more than doubling output capacity to 300,000 units, said Wang Xiaoqiu, general manager of the unit, SAIC Motor Manufacturing.
"Our target is to sell over 200,000 own-brand cars by 2010, with 45,000 of that shipped to overseas markets, including Europe," he said.
SAIC has targeted vehicle sales, including trucks and buses, of 2 million units by 2010, of which 600,000 would be developed on its own.
SAIC last year lost out to Nanjing Automobile in the bidding process for MG Rover, but owns the intellectual property rights to build the Rover 25 small car and Rover 75 saloon under an earlier deal.
The company is currently in talks to buy the rights to use the two models' names from German car maker BMW.
Overseas ambition
Global auto makers have rushed into China in the past few years, setting up factories at breakneck speed to grab a piece of the ballooning car market.
Analysts have warned that some foreign brands would be squeezed out eventually, given the Chinese government's stated ambition of nurturing a national car industry through the biggest brands, including SAIC, FAW and Dongfeng Motor.
To make sure homegrown brands would acquire the necessary technology, Beijing requires foreign auto makers wanting to set up shop in China to partner with a local car maker, with a 50 percent ceiling for ownership of any joint venture.
China's strategy of leveraging well-known Western brands to take products abroad is not new.
A swathe of Chinese firms from PC giant Lenovo Group Ltd. to home electronics firm TCL Corp. have trod the same path, to the dismay of globally established rivals.
With decades of experience gained through world-class players GM and VW, analysts said SAIC has a better chance at success than Geely and Chery, although they still faced hurdles selling abroad, most notably concern over quality and price.
"There is certainly a chance for SAIC to succeed with its own brand, but it needs to get the price right," said Matthew Kong, an auto analyst with Fitch Ratings.
"They've got to give me a good reason to pick a new SAIC model rather than the more familiar Accord or Camry," he added, referring to Honda Motor Co. and Toyota's best-selling cars.
An SAIC executive said the car maker would offer a broad range of own-brand passenger cars priced from 65,000 yuan to 300,000 yuan ($8,115 to $37,460).
The first model due out soon would be a mid- to high-end sedan based on the Rover 75 platform, he said, declining to disclose the price.
Meanwhile, rival Nanjing Auto, which beat SAIC in the bid to take over MG Rover, plans to roll out its first locally made MG75 sedans in the first half of 2007 using acquired technology, state media said last month.
source:http://money.cnn.com/2006/04/10/Autos/china_cars.reut/
 
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