SAIC Buys Nanjing Automobile

By Brendan Moore

12.27.2007

It only seems like it took forever.

Shanghai Automotive Industry Corp (SAIC), corporate parent of Shanghai Motor Corporation in Beijing, has acquired Yuejin Motor Group, parent of Nanjing Automobile (Group) Corp.

The much-anticipated deal allows SAIC to take over all the key assets of Nanjing (which includes MG Rover) for the price of approximately $286 million USD.

The deal not only gives SAIC a great launching pad into Europe via the MG and Rover brands and the factory that produced same in Longbridge, England, it also consolidates part of the second-largest auto market in the world; that is, their home market of China. The same home market, incidentally, that put up a gaudy 35% growth rate in 2006. The takeover of Nanjing Automobile will make SAIC a much more formidable competitor to the foreign companies like GM and VW that currently control the largest market shares in China.

Part of the deal also requires Fiat to divest their 50% of Nanjing by selling it back to Nanjing. The guys at Fiat probably threw a party when they got that news because the joint venture has never met a single production or sales goal since it opened, and Fiat has been unhappy in that marriage for some time now. As an example, Fiat had forecast their sales from the joint venture to hit 300,000 units by 2010, and they just barely made it above 30,000 this year. So, Fiat will hardly be crying all the way to the bank when they cash that check for their 50% of Nanjing.

Fiat says that they will continue to cooperate with Nanjing on commercial vehicles and parts manufacture, but I think that statement is probably just window-dressing on the divorce so that both companies can save face concerning the break-up.

As a result of the acquisition, SAIC should reach capacity of around 2 million vehicles annually under their own brand in the next two years.

China’s annual economic growth has averaged 9 percent annually over the past 10 years, which has produced a tremendous amount of middle-class and upper-class car buyers new to the market. The country overtook Japan late last year as the world’s second-largest vehicle market after the United States.

Vehicle sales in China will pass eight million this year, and easily surpassed the full-year tally for 2006 in the first 11 months of 2007, according to the China Association of Automobile Manufacturers. There has been some discounting recently as manufacturers try to gain market share, but the overall new car market in China is expected to stay strong for years to come.

COPYRIGHT Autosavant.net – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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3 Comments

  1. I think you better check your facts because I don’t think China the #2 country behind the U.S. in auto market. I think they’re still like # 4 or maybe even 5. Last I heard China was losing sales because their cars are so cheap and dangerous. You might be speading lies and not knowing it so check your facts before you write something like this.

  2. jerry, you’re the one that needs to check his facts. CHina is number 2 with a bullet. All you need to do is google auto production in china and lots of articles will pull up with the same information. Or you could just google SAIC nanjing deal and get the same reference to china’s annual sales since most of the articles mention anuual sales in CHina. WHy don’t you do the most basic of research before you make stupid statements that are so obviously uninformed?

  3. China is, and will be, an automobile powerhouse for a long time. You have to wonder just how long it will be before the pass America in auto production. And you have to wonder when the trickle of Chinese cars sold in america will start and when that will turn into a flood. I think this is gonna be China’s century, with India close behind, my friend.

    And, Jerry? You need to get out more, son.

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