AFTER A HANDFUL of efforts to reverse into established markets by taking over failing firms like Rover or Korea’s Ssangyong, China is setting its sights on the expensive but underperforming jewels of Sweden’s industrial crown to gain a foothold in the west.
China is aiming to consolidate its regionally scattered network of car makers into a small group of tightly run, competitive auto firms that can compete internationally. To engineer these cars, Chinese firms are buying up troubled foreign auto makers or their technology. Sweden is the latest port of call for the cash-rich, technology-poor Chinese.
While General Motors announced last week that it was winding up the Saab brand, it confirmed the sale of the intellectual property rights to production on key models to Beijing Auto would go ahead.
Meanwhile car maker Geely Automobile is lining up the cash to buy another bastion of Swedish reliability, Volvo, from Ford. In October, Ford announced Geely was its preferred bidder for Volvo.
The car makers, which are owned by the Chinese government, are looking for engineering expertise in the shape of powertrain systems and are also eager to piggyback on well-known brands to sell Chinese products.
For the Swedes, it’s a desperate measure, but they are prepared to bite the bullet to save the company. Chinese upstarts like Beijing Auto and Geely are keen to get their hands on the know-how companies like Saab and Volvo have on offer, and start exporting in a major way.
China’s largest car maker, Shanghai Auto, bought a controlling stake in Korea’s Ssangyong to get access to a ready established dealer network in Europe, but that venture collapsed and Ssangyong is bankrupt.
The Chinese firms are also increasingly looking to upgrade the quality of the models they build for the booming domestic market, which is now the biggest in the world. Chinese consumers believe domestic cars are inferior and unreliable but are open to buying Chinese-made foreign cars.
The Saab deal includes intellectual property relating to engine and gear-box technology for Saab’s 9-5 and 9-3 platforms. Also, the production equipment used to make the 9-5 will be moved to China to produce Beijing Auto cars, and Saab will help integrate the technology into the Chinese company’s cars.
In some ways the deal is similar to the sale of Rover to Nanjing Auto in 2007, where the Chinese car company also bought powertrain technology and IP rights.