In a marathon that has just begun, no one wants to withdraw halfway. Almost all participants hope that they can stick to the finish line and get good results.
The Chinese auto market is just this marathon. The vast market prospect attracts many domestic and foreign automobile manufacturers like magnets. No one wants to give up easily at this time, even if the parent company and SAIC Group have signed a letter of intent for cooperation. The same is true of the group.
Unfinished chess
Just as people thought that Shanghai Automobile Industry (Group) Corporation (abbreviation: SAIC Group) and Nanjing Automobile Group Co., Ltd. (abbreviation: Nanjing Automobile Group) were about to enter the marriage hall with no suspense, a discordant voice came. .
The Shanghai Securities News of August 6 reported that Nanjing Automobile Group, which is discussing cooperation with SAIC, has thrown out the basic principle of three cooperations: “Nanhua Group’s corporate status remains unchanged, its registered place remains unchanged, and its tax status is constant". According to the report, the reason why the Nanjing Automobile Group proposed to maintain its status as a legal person is to operate independently its highly valued MG brand.
On July 27, SAIC signed a letter of intent with the parent company of the Nanjing Automobile Group, namely Yuejin Automobile Group. In a press release issued by the SAIC Group to the Financial Times, SAIC and the Yuejin Group will establish a joint working group based on the principle of full cooperation to discuss the two sides in the fields of vehicle, auto parts and auto service trade. The possibilities and plans for full cooperation and related asset restructuring work to achieve the full integration of SAIC and Nanjing Auto."
In fact, the issue of cooperation between SAIC and SAIC Group has long been known in the industry. The newspaper had made relevant reports on June 25 and pointed out that with the promotion of senior leaders in Shanghai and the Soviet Union, cooperation between the two sides will be discussed before the party’s “17th National Congressâ€. In the press release of the SAIC Group, it was specifically mentioned that "the discussion between the two sides on cooperation has received the support of the two governments."
However, compared with SAIC, SAIC Group does not seem to be so enthusiastic. In response to this industry-focused cooperation issue, Nanjing Automobile Group did not prepare an official press release for the media like SAIC Motor. Therefore, almost all media in the news reports of the signing of a letter of intent for cooperation between the two sides are from SAIC Motor’s “one-sided wordâ€. .
Regarding whether the "three basic principles for cooperation" was thrown out, Nan Ning Group spokesman Liu Ningsheng declined to comment. He told the "Financial Times" that cooperation is a matter for both parties, and the Nanjing Automobile Group is not in a position to stand unilaterally.
"Although the surface is a 'strong alliance', but in essence it is 'weak meat', this principle is understood by everyone. Therefore, there are some ideas in the Nanjing Automobile Group that are normal," said Zhang Xin, an analyst at Guotai Junan Securities.
SAIC Group's troubles
In Zhang Xin’s view, both the SAIC Group, which is in a strong position, and Nanjing Automobile Group, which is in a relatively weak position, do not have much say in the reorganization between state-owned enterprises led by the government. Therefore, both parties are likely to eventually Come together. However, this does not mean that such reorganization will definitely produce ideal results, and both companies themselves have certain problems. In addition to Iveco, NAC has few bright spots and has long been in a loss.
As one of China's three major auto groups, SAIC Group has always hoped to become a leader in Chinese auto companies. In 2006, SAIC Motor Group sold a total of 1.34 million complete vehicles, which surpassed 1.19 million units of FAW Group, making it the largest Chinese automaker in terms of sales volume.
However, it cannot be overlooked that SAIC's profits are almost entirely dependent on the two major joint ventures between Shanghai GM and Shanghai Volkswagen. In the sales of 840,000 vehicles in the first half of this year, Shanghai General Motors and Shanghai Volkswagen occupied more than half. However, the growth rate of Shanghai GM is far below the growth rate of the Chinese auto market. Although Shanghai Volkswagen can maintain high growth, almost half of its sales come from the declining prices of Santana models. In the race for the most profitable Passat follow-up (Malteng), Shanghai Volkswagen lost to Volkswagen in China. The joint venture FAW-Volkswagen, after the listing of Magotan, forced the Passat leader to have to announce a substantial price cut.
Goldman Sachs therefore warned that as core models become obsolete, sales growth of these joint ventures will also slow down. Goldman Sachs also believes that the overall competition in the Chinese auto market will become increasingly fierce, which will be detrimental to Shanghai Automotive and its subsidiaries. In the first half of this year, the fastest-growing brands in the Chinese market were Toyota and Ford, both of which grew by nearly 80% and nearly 60% respectively compared to the same period last year. Both companies are not SAIC Motor’s partners.
SAIC Motor’s first self-owned brand, the Roewe 750, has sold 7632 units since its listing in March and the end of June. The industry believes that for a new car with no brand history, this should be considered a good result. However, as SAIC only bought two models from the bankrupt MG Rover, the Roewe's prospects are not optimistic on the follow-up models.
Unpredictable prospects
“The MG has no value for SAIC and commercial vehicles are the key to its coveting of Nanjing Automobile Group.†said Zhang Xin. Commercial vehicles have always been a short version of the SAIC Group, but it is the strength of the Nanjing Automobile Group. In the first half of this year, Nanjing Iveco's sales of high-end light passengers increased by more than 25%, which was twice the average increase of the domestic industry. Through the cooperation with Italy Iveco, Yuejin Group obtained a total of 120 commercial vehicle models. As for the brand MG, whether it is SAIC or SAIC, they have not fully grasped the success of its operation. "BMW has no successful brand, SAIC Group is also very difficult to operate successfully." Zhang Xin said.
Executive Vice President and Secretary-General of the China Association of Automobile Engineers Fu Yuwu once said in a public occasion that it is the pride of Nanjing Automobile Group to build a good car with a high level of MG, but whether it can sell such a good car is good. Let him worry.
However, Li Chunbo, an analyst at CITIC Securities, said that apart from commercial vehicles, MG may also be one of the assets valued by SAIC.
SAIC Group, a leading automaker in the Chinese market, has been seeking to become bigger and stronger, and hopes to win a place in overseas markets. It has also acquired South Korean Ssangyong Motor for this purpose. But mentioning MG, it was a heart disease of SAIC.
In 1994, BMW bought MG Rover for 800 million pounds. At that time, MG Rover had four brands: Rover, MG, Land Rover and MINI. However, this acquisition did not bring the same to BMW. The source of financial resources was a loss of more than 3 billion U.S. dollars. In desperation, BMW had to split MG Rover and sold Land Rover, MG and Rover separately to Ford Motor Co. and British private investor Phoenix Group.
After learning that Nanjing Automobile Group planned to purchase MG Rover, SAIC Group won the contract and first signed a contract with Phoenix Group, and rejected the proposal of Nanjing Automotive Group to jointly purchase MG Rover. According to industry analysts, SAIC Group, which was in a thriving state at that time, did not take Nankai Group as an example, hoping to swallow MG Rover alone.
However, the bankruptcy of MG Rover made SAIC's plans fail. Due to concerns about threats to its luxury car brand Jaguar (Jaguar was also one of the brands owned by MG Rover), Ford Motor Co. purchased the Rover brand with a preemptive right, and NAC Group will also use MG Rover production equipment and MG. Most of the assets of the brand, sales network and even intellectual property are in the bag. SAIC Group spent 10 million pounds more than Nanjing Automobile Group, only bought two outdated models and had to change from buying a brand to creating an “own brandâ€.
In this MG Rover battle, SAIC Group not only lost ground, but also caused friction with the Nanjing Automobile Group, which casts a shadow over the prospects for cooperation between the two sides.
According to overseas media reports, SAIC Motors has already negotiated dealerships for exporting a Roewe coupe to Europe since 2009, and MG is famous for its old sports car brand. "If the Roewe coupe can land in Europe with MG's brand and channel, it will undoubtedly have far-reaching strategic significance to open the market quickly," said a market source.
All along, the Chinese government has the idea of ​​integrating the decentralized auto industry and cultivating the giants of the global auto industry, and has achieved certain results in other industries such as steel, but the drawbacks of the government-led corporate restructuring are also obvious. Li Chunbo believes that in the case of mergers and acquisitions in the automotive industry, failure cases are far greater than successful cases. Therefore, the prospects for cooperation between SAIC and SAIC are still difficult to predict. "The bigger SAIC Group won't necessarily succeed. Those small car companies won't necessarily be eliminated. The effective way of industrial integration is the market rather than the government behavior." Li Chunbo said.
View related topics: SAIC commercial vehicle expansion