China picks European cars off scrapheap

September 17, 2009

GERMANY/Chinese carmakers are seeking to step into the gaps left by U.S. companies in Europe — but while acquisitions may give them access to badly-needed technical know-how, global brands and exposure to new markets, the question is whether they have learnt from past failures.

With China now the world’s largest car market, it’s no surprise that Chinese carmakers — which have few if any really solid brands within their home market — want to start making more of a mark.

In theory, foreign acquisitions offer a quick way to do so. Meanwhile the credit crunch has thrown world-renowned but now distressed car marques such as Volvo, Opel or Saab onto the block at what look like rock-bottom prices.

The worry is that Chinese carmakers haven’t always found it plain sailing abroad. SAIC Motor Corp is still feeling the pain of buying into Ssangyong Motor Co of Korea. Ssangyong has struggled to compete as South Korea’s smallest carmaker, failing to develop new models and running out of cash. A debt-for-equity swap threatens to slash the Chinese company’s holding in the South Korean carmaker from just over 50 percent to around 10.

Chinese companies have had more success when they have simply acquired technology and taken it back to China. SAIC had much more success when it bought Britain’s MG Rover. In that case, SAIC closed most of the UK manufacturing and used the know-how to launch a mid-range sedan called the Roewe. This has proved successful in China.

It looks as if Chinese manufacturers are trying to emulate SAIC’s Rover experiment rather than its Ssangyong adventure.

Although Chinese carmakers looked at Opel, they backed away from trying to buy it outright. Geely Automotive has now stepped forward as a possible partner for Opel’s new owner, Canadian car company Magna. But it looks as if its role may be more as that of a supplier of manufacturing capacity than an outright owner of the brand.

In the case of Saab, Beijing Automotive Industry Corp (BAIC) has agreed a deal with supercar manufacturer Koenigsegg to help fund its purchase of the iconic Swedish company.

BAIC is shelling out 275 million euros ($406 million) and, according to a source close to the deal, will fund future development costs at Saab. The hope is that the Chinese carmaker’s involvement could dramatically increase the number of cars Saab is able to produce and sell in China, while still preserving Swedish jobs.

Most Chinese carmakers have been wary of making a major step outside their own market. Chery Automobile, Hunan Changfeng Motors Co and others have all kicked the tyres of various European or U.S. auto brands but walked away. It still seems that they are wary of trying to manage large foreign manufacturing operations — perhaps for good reason having seen how difficult it is even for indigenous managers.

The cherry picking approach — tapping into brands and technology without full ownership — probably makes more sense, especially at a time when prices are low. The key question is whether the Chinese can lift the brands they pick up off the scrapheap. BAIC will be hoping that, like Rover, Saab can find a new lease of life on the streets of Beijing.

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see

[...] Reuters beobachtet den Vorstoß asiatischer Autobauer in Europa, wo besonders Unternehmen aus China die Lücken füllen wollten, die US-Firmen hinterlassen hätten. Ob aber beispielsweise Geely Automotive (als möglicher Partner von Magna) bei Opel oder BAIC (als Finanzierungspartner von Koenigsegg) bei Saab reüssieren könnten, hinge davon ab, ob die Unternehmen aus früheren Pleiten gelernt hätten. So leide SAIC noch immer unter der Beteiligung an Ssangyong Motor in Korea, weil Ssangyong Schwierigkeiten habe, sich als kleinster Autobauer Südkoreas zu behaupten. Besser sei es für SAIC bei der Übernahme von MG Rover gelaufen, als der größte Teil der Herstellung in Großbritannien geschlossen wurde, während das Know-How der Briten eingesetzt wurde, um eine Mittelklasse-Limousine („Roewe“) erfolgreich auf dem Markt zu platzieren. „Die Rosinenpickerei – bei Marken und Technologie einsteigen ohne eine komplette Übernahme – ist vielleicht auch sinnvoller, besonders in einer Zeit, da die Preise niedrig sind. Die entscheidende Frage ist, ob es den Chinesen gelingt, die Marken zu fördern, die sie vom Schrotthaufen aufgesammelt haben“, lautet das Fazit von Reuters. [...]