CHINA: Major parts maker plans own-brand vehicle assembly - report
China's major automotive component maker Shanghai Automotive Co. on Wednesday said it would complete the takeover of SA-Yizheng Automotive Co. from its parent as part of a plan to venture into the vehicle assembly business, Dow Jones reported.
Shanghai Automotive Industry Corp. (Group), the parent of the Shanghai-listed parts maker, aims to produce at least 50,000 vehicles under its own brand by 2007 and that project will be managed by the listed unit, Xue Hao, a spokesman for the parent company, also known as SAIC, told the news agency.
Dow Jones noted that SAIC also has joint ventures with General Motors and Volkswagen to produce cars under the foreign carmakers' brands - thanks to those ventures, SAIC's sales last year exceeded 800,000 vehicles.
The report said Shanghai Automotive acquired 99% of SA-Yizheng Automotive from SAIC in May last year, and plans to conclude the takeover with the purchase of the remaining 1% for 3 million yuan, according to an announcement by the parts maker.
Xue reportedly said it wasn't clear when SAIC's own branded vehicles would be launched, or whether they would be passenger cars, trucks, or buses - the brand name that would be used hasn't been decided yet either.
Xue told Dow Jones SAIC has an existing minivan brand, Saibao, which sold about 2,000 units last year.
Michael Dunne, founder of marketing and consulting firm Automotive Resources Asia, told the news agency SAIC's push to manufacture vehicles under its own brand could unnerve its major foreign partners, especially if SAIC enters the passenger car business.
Passenger cars from SAIC would mean more competition for its partners GM and Volkswagen, which are already grappling with the overheating industry, the report noted, adding that the Chinese government is, however, committed to developing vehicles with brands and technology owned by Chinese companies, according to industry officials. Like SAIC, the major carmakers in China are state-owned companies, Dow Jones noted.
The report said that, in addition to the SA-Yizheng Automotive takeover, automotive parts maker Shanghai Automotive said it will buy its parent company's 50% stake in a brake parts maker for CNY29 million and will also buy a 21% stake in a spring maker for $1.26 million, bringing its stake in that unit to 40%.
The spring maker, called Shanghai Zhonglian Xiancai in Chinese, is a joint venture with a couple of Japanese firms and the acquisitions would help increase efficiency and lower the cost of production, Dow Jones said, adding that the three stake transfer deals still need shareholder approval.