Wo Er Wo Volvo China Straits Times June 18
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BY PEH SHING HUEI CHINA BUREAU CHIEF BEIJING: It started with Hummer. Volvo could be next. Opel, Buick and Jeep are targeted too. In the not too distant future, the fa- mous vehicle brands of the West may be more Chinese than European or Ameri- can. As the US auto industry disintegrates, Chinese carmakers are circling over the carcasses of the likes of General Motors and Chrysler, eyeing the marquee interna- tional wheels owned by the tottering American giants. “Things are cheap now. It’s good shop- ping time,” said Mr Richard Tay, a former vice-president of DaimlerChrysler in Chi- na. Beijing Automotive, one of China’s big five motor giants, is reportedly sending a team to Sweden this week to size up Vol- vo, adding its name to a growing list of Chinese bidders for the brand that is known here as Wo Er Wo. This follows one of the most eye- popping bit of auto news in recent weeks, when it was revealed that little-known Chinese machinery maker Sichuan Tengzhong had made a surprise bid for Hummer – that petrol-guzzling behe- moth made famous by American GIs and, of course, Arnold Schwarzenegger. The deal, which has not yet been ap- proved by the Chinese government, is clouded in controversy, with many in Chi- na slamming the purchase as running con- trary to the official stance of promoting a greener society. But the acquisition of these foreign brands does carry a “high degree of attrac- tiveness” for Chinese companies, said Bei- jing-based auto analyst Bill Russo. The most alluring reason is to use these established names to grab a slice of the in- creasingly lucrative Chi- nese car market. For the past five months, China has been beating the US as the world’s largest car mar- ket, and the projection is for sales this year to crack the 10-million-unit barrier for the first time. Despite the economic crisis, Beijing showrooms are reporting two- month-long waits for cus- tomers wanting a set of new wheels. The International Mon- etary Fund estimates that by 2050, China will have as many cars as the whole of the world does today – 700 million. And Chinese buyers crave foreign cars, in par- ticular the Western brands, which are seen as status symbols, more prestigious than the local makes, or even the South Korean and Japanese cars. “The domestic companies are looking at foreign brands because they need them to target the higher-end market,” said an- alyst Ricon Xia of Daiwa Securities. While first-time, young car buyers in China make do with a domestic QQ or Dongfeng, there is no doubt that most ur- ban Chinese aspire to own a European brand such as Germany’s BMW or Mer- cedes-Benz. But the Chinese automakers also want these established Western brands to enter the international market. Instead of following the Japanese and Korean models of developing indigenous brands to conquer the world, the Chinese prefer a short cut. “How long did the Japanese and Kore- ans take – 30, 40 years? A brand takes generations to build. Nobody wants a Made in China car today. So it’s easier to buy a famous foreign brand,” Mr Tay pointed out. “That’s the advantage of the Chinese now. They have the money, they can shop. They do not need to start from ze- ro. Just copy and take over.” The acquisitions are also attractive as a means to obtaining the technology and global sales and distribution network which Chinese carmakers lack. While years of joint ventures with foreign giants like Volkswagen have allowed the Chi- nese to pick up some of the technologies – such as assembly techniques – experts say the local industry still faces diffi- culties in building a top-notch engine from scratch. But analysts have warned that buying these big brands does not mean that the road ahead will be smooth. Shanghai Automotive acquired South Korea’s Ssangyong in 2004, but it did not lead to happily ever after, and Ssangyong went bankrupt earlier this year. Mr Xia said many of these foreign car companies come with strong labour un- ions, something which Chinese firms will not be familiar with. These brands are also not in the best of shape. “The reason they are for sale is that they are not doing well,” said Mr Russo. “Chinese firms need to take a bite they can chew instead of swallowing the whole thing.” [email protected] www.straitstimes.com MOST-READ ONLINE Chinese folk hero freed. MOST COMMENTED Passengers cheat flu scan. Says fang_sal: “Governments in every country are doing their part to stop and minimise the spread of Influenza A (H1N1) and yet these people are not cooperating, wasting the time, effort and resources put in. It really needs everyone’s cooperation to bring the airborne virus to a full stop.” ST ON TWITTER If you use the micro-blogging tool Twitter, search for “@stcom” and add us for updates on top stories and other updates. TO CONTACT THE FOREIGN DESK, PLEASE CALL 6319-5745 BEIJING: While Chinese consumers lust after a foreign car, they are not too pleased when government officials are seen in one. Recent news that BMW has been added to the Chinese government’s purchase list of “official cars” has incurred the ire of not only netizens, but also the state media. They lambasted the decision, urging the government to show its patriotism by buying China-made cars instead. This is despite the fact that German brands like Audi and Mercedes-Benz have long been used by the Chinese government. Audi was the first foreign luxury carmaker to sign a deal with the Chinese government in the 1980s, and is believed to have accounted for 80 per cent of the official fleet at one point. According to the state media, the government now buys 20 per cent of all Audi cars sold in China. But while Audi and Mercedes are acceptable, BMW – known as Bao Ma in Chinese, and often associated with the nouveau rich – seemed to have crossed the line. The state-run China Daily English-language newspaper slammed the move in an editorial last weekend. “It is well known the brand’s image has been hurt as a result of repeated reports of wealthy BMW owners knocking down pedestrians,” it said. Netizens also decry the decision. “The recession does not seem to have an impact on the Chinese government at all. In this time of crisis, they are even looking for luxurious comfort,” said one on the popular Tianya forum. PEH SHING HUEI Beemers hit speed bump WHAT’S ONLINE MOST READ, MOST COMMENTED AND MORE Economic crisis great chance for Chinese firms to buy marquee makes SHORT CUT “How long did the Japanese and Koreans take – 30, 40 years? A brand takes generations to build. Nobody wants a Made in China car today. So it’s easier to buy over a famous foreign brand.” Mr Richard Tay, a former vice-president of DaimlerChrysler in China THURSDAY, JUNE 18 2009 A10 ●
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Article on Chinese aquisition of foreign automotive assets in June 18 Singapore Straits Times.
Transcript of Wo Er Wo Volvo China Straits Times June 18
BY PEH SHING HUEICHINA BUREAU CHIEF
BEIJING: It started with Hummer. Volvocould be next. Opel, Buick and Jeep aretargeted too.
In the not too distant future, the fa-mous vehicle brands of the West may bemore Chinese than European or Ameri-can.
As the US auto industry disintegrates,Chinese carmakers are circling over thecarcasses of the likes of General Motorsand Chrysler, eyeing the marquee interna-tional wheels owned by the tottering
American giants.“Things are cheap now. It’s good shop-
ping time,” said Mr Richard Tay, a formervice-president of DaimlerChrysler in Chi-na.
Beijing Automotive, one of China’s bigfive motor giants, is reportedly sending ateam to Sweden this week to size up Vol-vo, adding its name to a growing list ofChinese bidders for the brand that isknown here as Wo Er Wo.
This follows one of the most eye-popping bit of auto news in recent weeks,when it was revealed that little-knownChinese machinery maker Sichuan
Tengzhong had made a surprise bid forHummer – that petrol-guzzling behe-moth made famous by American GIs and,of course, Arnold Schwarzenegger.
The deal, which has not yet been ap-proved by the Chinese government, isclouded in controversy, with many in Chi-na slamming the purchase as running con-trary to the official stance of promoting agreener society.
But the acquisition of these foreignbrands does carry a “high degree of attrac-tiveness” for Chinese companies, said Bei-jing-based auto analyst Bill Russo.
The most alluring reason is to usethese established namesto grab a slice of the in-creasingly lucrative Chi-nese car market.
F o r t h e p a s t f i v emonths, China has beenbeating the US as theworld’s largest car mar-ket, and the projection isfor sales this year tocrack the 10-million-unitbarrier for the first time.
Despite the economiccrisis, Beijing showroomsare reporting two-month-long waits for cus-tomers wanting a set ofnew wheels.
The International Mon-etary Fund estimatesthat by 2050, China willhave as many cars as thewhole of the world doestoday – 700 million.
And Chinese buyerscrave foreign cars, in par-ticular the Western brands, which areseen as status symbols, more prestigiousthan the local makes, or even the SouthKorean and Japanese cars.
“The domestic companies are lookingat foreign brands because they need themto target the higher-end market,” said an-alyst Ricon Xia of Daiwa Securities.
While first-time, young car buyers inChina make do with a domestic QQ orDongfeng, there is no doubt that most ur-ban Chinese aspire to own a Europeanbrand such as Germany’s BMW or Mer-cedes-Benz.
But the Chinese automakers also want
these established Western brands to enterthe international market.
Instead of following the Japanese andKorean models of developing indigenousbrands to conquer the world, the Chineseprefer a short cut.
“How long did the Japanese and Kore-ans take – 30, 40 years? A brand takesgenerations to build. Nobody wants aMade in China car today. So it’s easier tobuy a famous foreign brand,” Mr Taypointed out.
“That’s the advantage of the Chinesenow. They have the money, they canshop. They do not need to start from ze-
ro. Just copy and takeover.”
The acquisitions arealso attractive as ameans to obtaining thetechnology and globalsales and distributionnetwork which Chinesecarmakers lack.
While years of jointventures with foreigngiants like Volkswagenhave allowed the Chi-nese to pick up some ofthe technologies – suchas assembly techniques– experts say the localindustry still faces diffi-culties in building atop-notch engine fromscratch.
But analysts havewarned that buyingthese big brands doesnot mean that the roadahead will be smooth.
Shanghai Automotive acquired SouthKorea’s Ssangyong in 2004, but it did notlead to happily ever after, and Ssangyongwent bankrupt earlier this year.
Mr Xia said many of these foreign carcompanies come with strong labour un-ions, something which Chinese firms willnot be familiar with.
These brands are also not in the best ofshape.
“The reason they are for sale is thatthey are not doing well,” said Mr Russo.
“Chinese firms need to take a bite theycan chew instead of swallowing the wholething.”[email protected]
www.straitstimes.comMOST- READ ONLINE� Chinese folk hero freed.
MOST COMMENTED� Passengers cheat flu scan. Saysfang_sal: “Governments in everycountry are doing their part to stopand minimise the spread of Influenza A(H1N1) and yet these people are notcooperating, wasting the time, effort
and resources put in. It really needseveryone’s cooperation to bring theairborne virus to a full stop.”
ST ON TWITTER� If you use the micro-blogging toolTwitter, search for “@stcom” and addus for updates on top stories and otherupdates.
TO CONTACT THE FOREIGN DESK, PLEASE CALL 6319-5745
BEIJING: While Chinese consumerslust after a foreign car, they arenot too pleased when governmentofficials are seen in one.
Recent news that BMW hasbeen added to the Chinesegovernment’s purchase list of“official cars” has incurred the ireof not only netizens, but also thestate media.
They lambasted the decision,urging the government to show itspatriotism by buying China-madecars instead. This is despite thefact that German brands like Audiand Mercedes-Benz have long beenused by the Chinese government.
Audi was the first foreign luxurycarmaker to sign a deal with theChinese government in the 1980s,and is believed to have accountedfor 80 per cent of the official fleetat one point.
According to the state media,the government now buys 20 percent of all Audi cars sold in China.
But while Audi and Mercedesare acceptable, BMW – known asBao Ma in Chinese, and oftenassociated with the nouveau rich –seemed to have crossed the line.
The state-run China DailyEnglish-language newspaperslammed the move in an editoriallast weekend.
“It is well known the brand’simage has been hurt as a result ofrepeated reports of wealthy BMWowners knocking downpedestrians,” it said.
Netizens also decry the decision.“The recession does not seem tohave an impact on the Chinesegovernment at all. In this time ofcrisis, they are even looking forluxurious comfort,” said one onthe popular Tianya forum.PEH SHING HUEI
Beemers hitspeed bump
WHAT’S ONLINE MOST READ, MOST COMMENTED AND MORE
Economic crisis great chance forChinese firms to buy marquee makes
�
SHORT CUT
“How long did theJapanese andKoreans take – 30,40 years? A brandtakes generations tobuild. Nobody wantsa Made in China cartoday. So it’s easierto buy over a famousforeign brand.”Mr Richard Tay, a formervice-president ofDaimlerChrysler in China
THURSDAY, JUNE 18 2009 A10 ●
