Chosun Ilbo reports that the Chinese government has refused to approve a project by Ssangyong Motor and its largest shareholder, Shanghai Automotive Industry Corp. The two companies were to establish a joint venture to produce and sell SUVs tailored to Chinese tastes, but Ssanyong’s foray into the Chinese market is now in doubt.
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SAIC Motor has recently asked permission to build joint manufacturing facilities in China, the core element of the so-called “S-project,” but the Chinese government said no, according to a Ssangyong executive. The reason is that Beijing fears overinvestment in car plants and is trying to stop any more of them being built, he said.
Ssanyong wanted to build the plant in China because the country’s high tariffs of 28 percent make it difficult for the Korean firm to compete there otherwise. Ssangyong was to provide its own technology used for the Kyron, its mid-sized SUV launched last year, for the joint project.
“Ssangyong takes up a mere 6.6 percent as of 2005 in the domestic car market, and the Chinese government’s rejection of the project puts an even greater burden on the company,” a Ssanyong executive said.
When the project started to look unlikely, the company announced it will procure Chinese-made auto parts for its domestic plants through Auto Parts Sourcing International Service (APSIS), a SAIC Motor affiliate.
APSIS supplies auto parts to SAIC Motor partners companies such as Shanghai GM.
