Driving abroad

By Yang Jing Source:Global Times Published: 2014-6-13 5:03:02

A MG CS Concept of SAIC Motor is displayed during the Auto Shanghai 2013 show in Shanghai on April 20, 2013. Photo: CFP

Earlier this month, Shanghai-based automaker SAIC Group and Thai conglomerate CP Group rolled out its first car made by their joint-venture SAIC Motor-CP Co in Thailand.

Faced with intensive competition in the domestic market and tax barriers for car exports overseas, Chinese automakers have started to set up factories abroad.

According to a report released by industry research website chinairn.com in April, at least five Chinese automakers, including both State-owned enterprises and private companies, announced plans to build factories overseas. 

SAIC Motor-CP

The joint-venture SAIC Motor-CP was founded in November 2012, and in 2013 announced it would produce MG, a well-known British brand that SAIC bought in 2005.

In 2014, auto parts supplier Huayu Automotive Systems Co and auto logistics company Anji Logistics Co, which are both Shanghai-based SAIC subsidiaries, also set up branches in Thailand, the joint-venture said in a press release last week, noting SAIC built a basic industry chain in Thailand.

SAIC has a 51 percent stake in the joint venture and CP holds the rest, newspaper Bangkok Post reported on June 5.

The joint venture invested 9 billion baht ($278 million) for the first plant in Rayong's Hemaraj Eastern Seaboard Industrial Estate, and plans to invest 30 to 40 billion baht in a second Thai plant which is expected to be done by 2018, the report stated.

The production capacity of the joint venture will be 50,000 vehicles per year, mainly consisting of MG and another UK brand, Maxus Datong, previously Maxus, acquired and renamed by SAIC in 2010.

With the preferential tax policy in the Association of Southeast Asian Nations (ASEAN) members, SAIC plans to introduce more models to Thailand and export through the joint venture to other right-drive ASEAN countries, including Malaysia, Singapore and Indonesia, according to SAIC's news release.

Bangkok Post reported that the joint venture's sales target for 2014 is 2,000 MG6s, mainly in Thailand.

SAIC Motor-CP Board Chairman Thanakorn Seriburi said the MG6 is just a beginning and the joint venture will start to export to Malaysia next year, according to the report.

Although SAIC declined to reveal the joint venture's market share target in Thailand when contacted by the Global Times, Bangkok Post said SAIC Motor-CP has an ambition to take a 10 percent share of Thailand's auto market by 2016, with 6 or 7 other models to be launched later.

A tide of ambition

In addition to the State-owned automakers such as SAIC, Chinese private car companies also joined the rush to explore the overseas market.

Chinese well-known automaker Geely Group announced in January to enter Brazilian market with its Emgrand EC7 model, which will be assembled in Uruguay, and appointed Gandini Group, a Brazil company, as its official and exclusive dealer in Brazil.

Geely also plans to build a factory in Brazil, the largest automobile market in South America and as well as the fourth largest auto market worldwide.

China Anhui Jianghuai Automobile Co Ltd (JAC) invested 3.7 billion yuan ($59.39 million) in Brazil to build a factory which will be finished in 2015, news portal 163.com reported on April 9, noting it will be the largest one in JAC's 14 overseas factories in countries including Russia, Vietnam, Iran, Egypt, Turkey and Mexico.

Another Chinese carmaker, Chery Automotive, will see its factory in Brazil start operation in the next half of 2014, which may make a big difference on Chery's market position in Brazil, chinairn.com.cn reported on June 6.

Chery sold 1,480 cars in Brazil in March, 158 percent up year-on-year, making a record for Chinese automakers' sales in Brazil after the South American country increased tariff on auto imports in 2011, the report said.

Great Wall Motor Co Ltd, China's largest SUV and pickup manufacturer, signed an agreement with the Russian Province of Tula about setting up a wholly-owned subsidiary and manufacturing base there with 3.2 billion yuan investment, the report said, noting Russia has become Great Wall's largest overseas market.

New hope for Chinese autos

Under pressure from global auto brands and joint venture brands, Chinese auto brands are having a hard time in domestic markets.

In the first five months of this year, Chinese auto brands vehicles saw less than 1 percent year-on-year sales growth, according to data released by China Association of Automobile Manufacturers (CAAM) on Tuesday.

The restriction on private car purchases in Chinese big cities have also had a negative impact on the Chinese auto market.

Under such condition, exploring overseas market is understandable and can bring new opportunities to Chinese carmakers, Zhang Zhiyong, Shanghai-based independent auto industry analyst, told the Global Times Tuesday.

Meanwhile, most overseas markets that Chinese automakers have a presence in developing markets whose purchasing power and requirements are similar to the Chinese market, Zhang said, adding Chinese automakers should take the lead before global auto giants occupy these new emerging markets.

"Exploring the global market is a natural step when a company is competitive enough," Zhang said, "The high tariff pushed Chinese automakers to produce cars abroad but it is not a decisive factor."

In 2011, Brazil increased its tariff on auto imports by 30 percent if more than 35 percent of the imported cars' parts are manufactured abroad.

Shi Jianhua, vice secretary-general of CAAM, agreed with Zhang and said "Just as when foreign automakers came to China decades ago, local governments always expected them to provide jobs, so it is important for Chinese automakers to pay attention to what benefits they can bring to local people for a good integration and business success."

Selling vehicles abroad can also help Chinese carmakers improve their reputation in the global market, which they need when they face competition with other brands, Shi said.



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