GM Daewoo’s letter of intent to bid for South Korea’s fourth largest automaker, Ssangyong Motor Company, will see it compete with Chinese groups Nanxing and SAI. If successful, this new acquisition could put GM in a strong position to compete against domestic manufacturers in the Korean market.
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Following last year’s deal where GM, the world’s largest car manufacturer, took a 42.1% stake in the South Korean manufacturer Daewoo, the company is now showing interest in domestic manufacturer Ssangyong. Ssangyong, which has the largest share of the market for sport utility vehicles in the country, is offering a 56% stake to international bidders.
Other potential bidders have been named, such as Chinese groups Nanxing and Shanghai Automotive Industry (SAI), as well as Citroen and Renault. Renault, already South Korea’s fifth-largest carmaker through its venture Renault Samsung, has denied that it is interested in the stake.
The stake, worth $US625 million, could be attractive for GM Daewoo, which last October announced a plan to broaden its portfolio in the large vehicle segment where it currently has no presence. In recent years, SUVs and large cars have been two of the most popular and fastest growing segments of the Korean vehicle market, and currently account for about 30% of industry sales.
The prospect of a merger between the two companies would result in a powerful rival to Hyundai Motor, the market leader, and its affiliate Kia Motors, which control more than 70% of the South Korean closed automotive market. With import tariffs reaching 8% and unique regulations such as emission standards for diesel cars, the South Korean market has always disadvantaged foreign manufacturers.
The South Korean venture shows hopeful signs as GM Daewoo’s exports are expected to almost double in 2003 to 250,000 units and reach 300,000 in 2004. By acquiring Ssangyong Motors, GM Daewoo would see its current market share of 9.7% in the Korean market rise to at least 30%.
