U.S. Market Not in China’s SAIC Short-Term Growth Plan

ANN ARBOR, MI – SAIC Motor based in Shanghai has no plans to build or sell vehicles in North America for at least several years, SAIC USA President Yi Lu says.

Lu’s remarks at an auto industry conference here today on the Chinese market come amid speculation that Chinese car companies looking to expand into the global arena might be tempted by a U.S. market rebounding from the recession.

SAIC USA recently opened its U.S. headquarters in Birmingham, MI, an upscale suburb north of Detroit, tasked by its Chinese parent to grow the company’s reputation in industry circles. The office’s primary function is to assist in the import and export of parts for General Motors’ Shanghai GM joint venture in China.

The two companies also have a JV with Wuling Automobile to build small commercial vehicles and share a design center in China. Additionally, they formed a holding company several years ago to build and sell Chinese vehicles in India.

Experts speculate most Chinese OEMs will enter global markets gingerly, focusing on regions where their products will be most competitive.

SAIC, for example, counts the U.K, where it sells cars under the historic British MG brand that it purchased some years ago, as its sole mature export market. The Chinese auto maker does not export elsewhere out of China, where its sales last year reached $54 billion to make it the world’s No.7 auto maker.

But experts say quality issues continue to hound Chinese auto makers.

“These are companies that are well-schooled by the joint-venture partners,” says Bruce Belzowski, assistant research scientist at the University of Michigan Transportation Research Institute. “They understand the risks,” he tells WardsAuto on the sidelines of the UMTRI conference.

There is precedent for Asian auto makers coming to the U.S. and staggering out of the gate, a fact not lost on Chinese OEMs. But, adds Belzowski, if the Chinese market encounters overcapacity, as some worry given the recent cool down in sales relative to its meteoric growth in the past decade, they may have no choice.

“If push comes to shove and there is overcapacity, I’m not sure (the Chinese) won’t come,” he says. “But as it stands, I wouldn’t expect them anytime soon.”

Lu says falling sales this year have led to some pricing pressures in the country.

A WardsAuto forecast sees the total vehicle sales in China growing 5.5% this year to 19.5 million units, impressive numbers but off the big double-digit increases of previous years.

“The pricing is competitive,” Lu says. But overcoming the dilemma in China is not different from other auto markets: “Introduce new products with the latest technology.”

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