SHANGHAI (AdAgeChina.com) -- Geely Automobile Holdings has been eyeing Volvo for years. Now another Chinese company, Beijing Automotive Industry Holding Co., is also pursuing the troubled European car brand that Ford Motor Co. has put up for sale.
Both are small companies by international standards. Without funding from government controlled banks, neither would be able to finance the deal.
The government has now thrown its weight behind state-owned BAIC, but the company that really deserves its support is the privately-owned Geely.
Geely is the better suitor for several reasons.
Last year, Geely stopped making cars priced below 40,000 RMB ($5,857) altogether. Later this month, the car maker will launch a new model with a starting price of around 80,000 ($11,713).
Although BAIC runs joint ventures with two foreign car companies, South Korea's Hyundai Motor Co. and Germany's Daimler, it is still largely an investment company. In 2008, it assembled engineering and management teams to develop its own brand car. One year later, the state-owned company hasn't made much progress towards that goal.
Second, Geely has some experience with overseas acquisitions. Last year, it bought the Australian transmission maker Drivetrain Systems International. BAIC has never made any acquisitions outside China.
Third, Geely has a solid organizational structure and a modern management system, which enabled the company to get a listing on Hong Kong's stock exchange in 2004. By contrast, BAIC is in the middle of transforming itself into a modern company from an old state-owned enterprise.
Why has the government chosen to support BAIC's bid for Volvo? Historically, state-owned enterprises like BAIC have closer ties to the government.
However, auto manufacturing is a highly competitive business and managing a global brand like Volvo will present unprecedented challenges for any Chinese automaker.
If the government is really keen to encourage domestic automakers to expand abroad by taking over troubled foreign brands, it should pay more attention to the technical capabilities, management expertise and international experience of the candidates seeking its backing.
In this case, on all counts, Geely is obviously a stronger candidate than BAIC.
Yang Jian is the managing editor of Automotive News China, which first published this editorial.
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