Chinese carmaker's push threatens Western rivals

SAIC launches upscale sedan, targets consumers who favor foreign brands

By Published on .

nmadden@crain.com

[shanghai] As the Chinese aggressively build their own brands, China's second-largest carmaker is striking fear in automakers around the world.

Shanghai Automotive Industrial Corp., long a joint-venture partner of both General Motors Corp. and Volkswagen Group in China, is launching its own upscale sedan, called Roewe. SAIC has also started indicating publicly that it would like to buy out GM and VW from their respective joint ventures.

Chinese automakers such as Chery Automobile and Geely Automobile for years have made cars that compete against foreign brands, but they are usually small and cheap. More affluent consumers prefer cars with proven technology, which has helped turn GM and Volkswagen into household names in China.

The Roewe, unveiled late last month, is aimed at wealthy buyers but built by a Chinese company using Western technology and design expertise. SAIC developed the Roewe based on the Rover 75, using technology and intellectual-property rights acquired from British carmaker MG Rover in 2004.

The name, like the car itself, has sparked controversy. The Rover brand name still belonged to BMW, Rover's former owner, but SAIC was confident it would be able to buy it for the new car. But Ford Motor Co. had the right of first refusal thanks to its acquisition of Land Rover in 2000, and cannily waited till the last moment to snatch the Rover name away from SAIC. Scrambling for a new name to launch the car, SAIC settled on Roewe, supposedly derived from the German word "loewe" for "lion," although "Roewe" sounds much like "Rover."

The car's Chinese name, Rongwei (which sounds oddly like "wrong way" to the English ear), embodies Chinese core values through characters with meanings such as "glorious, reputation, authoritative and respect," said Viveca Chan, Hong Kong-based chairman-CEO of WE Worldwide Partners, the architect of the Roewe brand. Ads broke last month in Shanghai, including a 15-story-tall ad wrapped around a high-rise building.

European, American and Asian car companies have watched Chinese automakers evolve with astonishing speed from inefficient state-run behemoths hungry for foreign investment and management experience into sleek operators more interested in acquiring overseas carmakers than partnering with them.

Steve Betz, Chevrolet brand director at Shanghai GM, declined to comment on SAIC's transformation from partner to rival, although he did tell Ad Age, "There will be Chinese cars imported into the U.S. eventually. I definitely see that happening, [and they] will definitely be competition."

Jack Perkowski, Beijing-based chairman-CEO of Asimco Technologies, which manufactures auto parts in China, warned, "If [GM and VW executives] aren't worried about SAIC's expansion plans, they should be."

Roewe is the first car brand SAIC has created outside of its joint ventures with GM and VW, but it won't be the last, according to Chairman Hu Maoyuan, who has publicly stated that the Roewe launch is just the beginning of SAIC's ambitious plans.

The Roewe is only one example of how competitive Chinese companies can be, at home as well as overseas. Last year, Nanjing Automobile Group Corp., a SAIC rival, bought Rover's MG brand.

"We're viewing ourselves as a global company, not a Chinese company," Duke Hale, president-CEO of MG Motors North America, told reporters earlier this year.
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