Chinese Automaker SAIC Targets India

Posted by: Bruce Einhorn on December 8, 2009

It’s been a busy week for China’s top automaker. Shanghai Automotive Industry Corp (SAIC) today announced it had formed a joint venture with Japanese electronics company Pioneer to produce car navigation systems in China. The announcement comes just days after SAIC said that it had teamed up with General Motors in a 50-50 joint venture to sell small cars and other vehicles in India.

Till now, SAIC has been the cautionary example of what could go wrong when a Chinese automaker ventures abroad. The company bought a controlling stake in Ssangyong Motor, the Korean car company, in 2004 for $500 million. The partnership was a disaster and early this year Ssangyong went into receivership. As the New York Times reported in February, SAIC faulted Korean anti-Chinese bias for contributing to Ssangyong’s woes.

The Koreans dispute that, but let’s assume that SAIC has a point. What does that mean about the company’s chances to succeed in India? The two Asian giants fought a war in the early 1960s and today the countries have an unresolved border dispute that flares up every so often. Not the best environment for an automaker from China. Yes, some Chinese companies in white goods and consumer electronics have enjoyed success selling in India. But companies in the auto industry are more at risk to nationalism, both positive (witness the enthusiasm in India after the launch of the homegrown Tata Nano) and negative. Good thing SAIC has formed a deal with Pioneer, because it’s going to need as much help as it can get as it tries to sell Indian consumers on the idea of Chinese cars.

Reader Comments

jj

December 8, 2009 9:44 AM

The truth is SAIC bought Ssangyong, took all the technology and blueprints back home to copy and did not invest in the company. Basically sucked it dry. It's actually a cautionary tail of why not to sell a company to Chinese.

jj

December 8, 2009 9:50 AM

Also, we need to tell Chinese none of their cars could be imported into this country unless they scrap the 50/50 joint venture rule in their own turf. For example, by forcing GM to team up with SAIC, we are transferring all of our technology and know how to them while splitting the profit. GM is basically teaching them how to compete against GM itself in the US in the future. Talk about unfair!

Driver

December 8, 2009 10:33 AM

There is no point in SAIC or any other Chinese automakers targeting India.

China is India's primary security threat, the opponent in a nasty territorial dispute and the primary military sponsor and arms supplier of Pakistan, another adversary of India.

Accordingly China and all things Chinese are hated in India and selling the enemy's car in India is a tough business regardless of price. I know SAIC wants to hide behind GM badge to get around this "origin" problem, but Indian consumers are not stupid and they can smell a Chinese car from a mile away.

Heck, China offered to set up Mandarin language teaching centers in India and run lessons with its own money, yet India refused.

matovu junior

December 8, 2009 11:04 AM

but is it for the best?

Esayas Gebremariam

December 8, 2009 12:41 PM

I heard The Chinese don't like Japan ,still they buy their producs!!! The war example is a bit illogical to me!!!
@ji why do they have to buy a Korean technology for $500 million, is it at all worth it? I don't think so.I belive , SAIC will still find buyers in India even if they have now a better option for the bottom customers

@Jj

December 8, 2009 1:16 PM

I'm sure Indians have a lot technology that the damn Chinese can steal from?

newmaN

December 8, 2009 2:09 PM

@Jj,
That is absolutely right.

Raj

December 8, 2009 2:32 PM

Navigation systems don't sell cars. SAIC needs a lesson in sales. Also, SAIC is going to face huge prejudice in India given the worldwide perception of chinese products. And to make matters worse, they've teamed up with GM which is a virtually unknown brand in India. Mind you that the Indian car market is dominated by Japanese, South Korean and local Indian manufactures, so SAIC will have to come up with something of better quality than what they produce in China. A new brand that needs to battle prejudice in a nationally proud car market such as India is a prefect recipe for disaster. Good luck.

Korean Technology?

December 8, 2009 2:46 PM

Just curious, what technology does Korea have? Didn't they copy Japanese cars in the first place? Didn't Japanese copy American cars in the earlier days?

blowfish

December 8, 2009 3:43 PM

"The truth is SAIC bought Ssangyong, took all the technology and blueprints back home to copy and did not invest in the company. Basically sucked it dry."


U make it sound like the Chinese are very good at printing money or photocopied them by Xerox. 500 Million in 04 probably worth 20% or greater than what its worth now.
And they really that dumb to blow such a princely sum for Second or 3rd rate technology? Plus when buying into a Joint Venture we all knew u need to put in Time, Energy, Expertise, Manpower etc. Would it be cheaper to buy a few cars & took it all apart to figure it out? Aren't these were suppose to be a bright Engineer's job.
We can go back to history, during the WWI hostilities the British captured a Mercedes V12 fighter plane engine, they handed it over to FH Royce to study not too long after the Merlins were developed.
All the Chinese want is getting into a car market, not going to win any Lemans or Idianapolis 500. They don't need 120 HP per Litre engine, no need 100 MPG carburettors.

Do we need owning a Jumbo jet before u embark a World tour.
For any auto manufacturer, if u over built, the car is going to last.
Just GM is so good in thinning out its component IE thinner gauge of steel or Anti-roll bar will do.

The Chebby Corvair was a prime example , they could have spend another $30 to have a thicker rear anti-roll bar, if that had happened Ralph Nader would have to write a book on another topic.

It's actually a cautionary tail of why not to sell a company to Chinese.

When u sell your proprietary Intellectual designs, lock stock & barrel u kind of expect someone is going to copy whatever u have achieved.

Or we could look at NSU & Dr Felix Wankel's Rotary engine, basically they have gone as far as they can, if they never sold their rights to Mazda, u think we will see any more Rotary engines now?
Some report suggest the Rotary's un-conventional combustion chamber could be ideal for Hydrogen fuel, as it shaped differently than a normal piston chamber.

C. H. Ng

December 8, 2009 9:23 PM

Maybe there is an element of truth in what "Jj" said in his/her comment. But this time the picture is in India & we all know that India is never known for her car technology & so the issue of "stealing her technology" shouldn't be an issue.
Still I can't understand SAIC's reason for venturing in India knowing very well the people there tend to treat China as their rival & therefore might boycott her products (even though here it's a 50-50 JV with GM). Maybe the guys up there in SAIC were just taking into consideration (looking at the figure) that IF only 10% out of 10% of India's population are in the car buyer market & who will not have this anti-Chinese feeling, that would meant roughly about 10 million cars sales target waiting to be tapped. I don't know...I am not a car salesman anyway...

Indian

December 8, 2009 10:15 PM

Good luck trying to compete with Tata's and now Bajaj-Nissan which is out to better the Nano cost structure. India is probably the most price sensitive market in the world, unless you can get a lower price AND better quality than the Tata's, you can forget about the entry level markets. Better to focus on the mid-level segment.

JJ

December 8, 2009 10:15 PM

C.H. Ng

You are right - you are not a car salesman. You sound more like a used car salesman!

rob

December 8, 2009 10:21 PM

Totally totally right. It is the India automobile company SAIC that is investing in China. With foreign reserves to burn India Inc. is branching out into the world, including the totalitarian China. However corporate India has to watch whether Indian IPR will be protected in China, as India companies have the holly oil called democracy. With this holly oil, all the best innovations can be invented by India Inc, including Nano, Bajaj, and the Swift. Go India. Jai Hind!

Eny

December 8, 2009 10:26 PM

What Jj said is exactly what those korean Ssangyong workers thought, they were adraid of their jobs, they tried everything to sabotage the production, and make strike everyday with their union, SAIC found it's not a friendly investment country, Koreans always thought they were the 'best', unfortunately they are not. they want go to sell their car in China and not let Chinese companies invest in their country, that's what they did in US, they want a free trade with US but not let US to sell the car there. Now they want to build a tunel under yellow sea to China, unfortunately China donesn't see the economic interest

Steve Bangalore

December 8, 2009 11:33 PM

India has radically changed the requirements for Business Visas and Work Permits. It will be interesting to see how many Chinese are allowed to work in those plants. Look for strikes and mass protests by the Indian workers and land owners.

Husin O'Bama

December 9, 2009 12:17 AM

A car is a dumb moving box that emits pollution that kills people and poison the world. Do we need more of that rubbish in the world?

Newbie

December 9, 2009 1:27 AM

It's a given that Chinese cars CANNOT be high quality nor can they be inexpensive (Nano's there). So it will be interesting to see where SAIC targets itself in the markey pyramid.

Ben

December 9, 2009 2:21 AM

SAIC and GM has at least one thing in common, they got burned by buying some Korean car maker thinking they can get a share of the Korean market. SAIC got furned by Ssayang, a near dead common that was driven to deapth by Korea's ultra radical unions. GM got burned with Daewoo as its management abuse GM's investment on risky specualtions and got a Billion dollar hole for GM to fill, at a time when GM had to use American tax payers money to survive. Since GM has no money to invest in India properly, they need SAIC's money. SAIC happen to have some real cheap vehicles that are good for poor Indians. A $4000 truck that are a lot more useful for farmers than a Nano.

C. H. Ng

December 9, 2009 2:23 AM

@JJ ... do I really sound like a 2nd hand car saleman? I don't think so. Anyway nobody ever said I sound or look like one....! Don't know what made you think so...??

@ Korean Technology?.... I agreed with what you said; in fact every technology can be said is copied from the original inventions. Like the modern planes from the Wright Brothers, lightings from Thomas Edison...etc etc.

@Esayas Gebremariam .. yes, the Chinese
hated the Japanese for her brutal ravages of China during WWII, but that doesn't stop current Chinese from buying or admiring her products which not only included cars but many other things like fashion & trendy things. That shows that most Chinese are not really biased but just practical.

As for @Husin Obama, a car might be a dumb moving box to you & you don't need one as a donkey-cart or a camel will do wonderfully for you, but to many of us people here, we sure prefer it as our form of modern transport. Thank you for your comment anyway, Mr Husin.

VP

December 9, 2009 4:46 AM

If SAIC has to be successful in India, it has to first establish its brand. SAIC will be competing against known brands like Suzuki, Tata, Hyundai, Toyota, Honda & other established brands. While Indians are cost sensitive they do not like cheap products, so SAIC has to sell quality products. Lastly, SAIC has to be develop a efficient sales & service network, an area where even Fiat failed in India. Indians will buy Chinese cars, like they buy other Chinese stuff if they get the right product at right price.

Mohan Nair

December 9, 2009 8:31 AM

Tough luck SAIC with already established Indian, Japanese, European and North American brands, it is going to hard to sell Wulings in India.

Chinese products have a stigma of bad quality, which will be very hard to ge rid off. If this does not help then the "friendly" communist controlled trade unions will shut it down.

Army

December 9, 2009 10:21 AM

Most of people in the world are untruthful.They look like patriotic ostensibly but prefer benefits stealthily.Those indians are not exceptional.Comparing with expensive cars from Japan or korea,they are more like Chinese cheap cars.That is forecast destined to be true.

Quality any one?

December 9, 2009 10:37 AM

I am surprised that no body talked about quality yet. Indian consumers are brutal when it comes to poor quality products. They bury them fast with out mercy. Chinese companies have a reputation for and a track record of producing poor quality products on a large scale. How are they going to climb out that insurmountable "quality perception mountain"? Comparatively, Indian auto companies already achieved Deming prizes and Japan Quality Medal(no Chinese company ever won these quality awards).

Carma

December 9, 2009 1:07 PM

SAIC ain't buying an Indian company yet. So comparing with Ssangyong is faulted.

Anyway running half a billion into bankruptcy in 4 years is amazing. I don't think they would have any more cash to splurge...

Plus if you need to steal technology, you can buy a (partnership in) Detroit Big3 these days with such xeroxed cash. Big3 still have tech that Chindia might like to buy (think JLR)

David

December 10, 2009 12:14 AM

Jj: You're full of it. Korea is probably the hardest market in the world for foreign automakers. About 1% of the market is foreign. 1%. Why? Because Koreans are notoriously nationalistic and will only buy Korean. Look it up. SAIC was not in the wrong about that one. They didn't buy Ssangyong to just take their tech (what tech?). They merely underestimated Korean nationalism. India will be a hard market as well since Indians always talk up rivalries with the Chinese.

Edward Eng

December 10, 2009 12:40 AM

More power to China but I think they are going to have one hell of a time selling cars in India. They gotta face local industry giants like Tata and Maruti, both experienced in making small-size cars. What can SAIC offer that those two companies can't? Another problem I see is SAIC losing market share to competitors in China, their home ground. They should probably just stick to their bread and butter. There are 300 million Chinese in the middle class now. That leaves 1 billion looking to climb out of poverty. If China doesn't continue to progress in the direction they are growing, the country will collapse. Therefore, this means that the demand for cars locally will continue to grow for many years to come in China. Diluting SAIC's power by entering a tough new market doesn't make a whole lot of sense to me right now.

-Edward Eng
http://blog.getchee.com

TP

December 10, 2009 10:39 PM

SSangyong had a JV with Mercs.

Their tech is basically Mercs.

China want Mercs' tech........not the low end Korean type

Fardream

December 11, 2009 11:45 AM

-Fj,

It's stupid enough to believe that we Chinese will copy Koreans...

Huyu

December 14, 2009 11:30 AM

My Indian friends, India may well be a super power in a few more years. Evidence? it is pretty easy to envisage that the India-China trade to be restored to its historic norms of being the largest a few century ago. However, before we can boisterously acclaim such, you, and we, shall remember that the house of Shangri-La is laid brick by brick, and each beam by beam. Please keep it hush-hush, and then keep on your good work. Let others proclaim you being one when they wake up in the Morning.

Prashanth

December 14, 2009 12:56 PM

Let the chinese come to India. Let them try to produce a car which will at least run for 1000km properly. If that happens then we shall continue this discussion.

I think Gm was doing OK in India. Are they nuts to gang up with chinese? Now i know why the american big 3 are so dumb(i admire ford though).

C. H. Ng

December 14, 2009 9:33 PM

@Prashanth:-

I don't think the people in GM are nuts to team up with SAIC and neither the latters are nuts to venture in India. They are business people who should know what they are doing or else their companies will not be as where they are even though you can say look at how badly GM is faring now.

Put it this way...we are not connected in GM or SAIC or any other car industry and therefore really don't have a faintest idea how they worked, or else we will not be here writing our comments in this blog.

C. H. Ng

December 20, 2009 10:22 PM

@Jj :-

I think I have to agreed with "David" & "Fardream" on their comments. Your Korea is far too nationalistic for other nation to try to venture in the market & it would be better for the Chinese to copy from the European and / or Japanese rather than from the Korean as far as the car technology is concerned.

Latest news about Hyundai planning a JV of USD400 million with Baotou Bei Ben to expand the truck businees in China next year serves to reinforce our argument it's the Koreans (and others)who are only interested to tap in the fast growing Chinese car market while trying to prevent transferring or sharing of technology to the Chinese.

yyz

December 22, 2009 12:43 AM

@ Prashanth,
I think 1000 kms is a lit bit of an exaggeration.People in glass houses should not throw stones.Indian cars are nothing to boast off.Just as chinese goods are cheap in quality and cost Indian BPO and services are same too.So let us not brag about who is where.We all know where we stand.

Interconnect

January 19, 2010 3:59 AM

SAIC strategy for India is the worst decision. SAIC should visit at the Delhi Motor show held in Jan 2010, and test and taste Indian waters, before they drink the water. India has an FTA/PTA with Korea exporting Korean Hyundai small cars to EU, beating Hyundai in the Indian market, and EU under license from Hyundai. Actually Hyundai Korea passed this order to India. With several ventures, j.v., with Japanese, Korean, US, European India is infact much stronger in small cars than China, except dumping. Yes there's market for SAIC to grow in the SAARC region for GM based small cars. China despite in the BRIC block cannot compete in India. But China has several FTA's, PTA's in the region, and the treaty has to be modified, to adhere the export of those foreign exchange countries to qualify for export to matured and emerging markets. GM is broke, and took a broke company Daewoo GM branded the tiny dinky with Chevrolet made and assembled in Korea. Today the transplant industry is in, abolishing tariff to emerging and developing markets. To qualify to zero or 5-10% custom duty for car assembly unit this is the catch. As otherwise the custom duty, sales tax, other levies range 150% average for small cars. Thats the clear subsidy for the screw driver industry for assembling cars. Detailed study reports available at eMail: interconnect.partner@gmail.com

emenot

February 19, 2010 9:22 PM

The Chinese stole rocket science, missile technology, vw technology, cyber attack of every nation of important...They are worst than Japan ever was!!!YOU CAN TAKE THAT TO THE BANK just as China have been doing the past 30 years!

Emenot-up

March 15, 2010 4:07 AM

@Emenot, any proof? the west stole Chinese technology of gun powder making, compass etc and what do you say about that?

@Jj, you Korean not only nationalist begot but also knowledge stealer. Look at your language (65% of them are Chinese words) and culture. Half of the SKorean population are now live in China, for what?

C. H. Ng

March 15, 2010 9:32 PM

"Emenot"....just wonder where you are from? It's easy for you to accuse China of everything w/o real basic facts. Lets look at the 4 things you mentioned:-

1) Rocket -- The Chinese were the one who invented it first & therefore talking about stealing, who is / are the actual thief / thieves?

2) Missile -- After WWII, the American secretly protected many German scientists & high ranking army personnels in charge of missile technology by spirited them back to USA to work on these weapons. That's how the American got this far. So may I ask who is the "original" thief (if the word "thief" is appropriate to use here)?

3) VW -- Both VW & Citreon must have a great vision to see a great potential in the Chinese market as they were the first 2 car manufacturers who invested in China long before the rest followed suit (correct me if I am wrong). For any car company to set up in another country, there must be some sorts of technology transfer or sharing if the venture is going to be successful. So the word "stealing" dosn't applied here.

4) Cyber Attack -- Q - who invented computer & started internet thing? A -not the Chinese. Q - who started the art of cyber attack? A - again not the Chinese. Q - then who were these original cyber attack masters? A - you know very well who they are. Final Q - therefore can we say the Chinese secretly copied their skill? A - yes & no, becoz they got very good teachers & they thenselves are also very good students.

Johny English

March 17, 2010 2:56 PM

I have never read such rubbish before. How little most of you know about Chinese built cars, or the world car industry in general.Are you all children?
Blowfish
Your suggestion thatb the Rolls Royce Merlin engine was based a Mercedes engin from a WW2 catured German aircraft is just stupid. For your information. The 1st Merlin engined aircraft flew in February 1935, and Production orders for Merlin Engined RAF Supermarine Spitfires and Hawker Hurricanes were placed in 1936, with both aircraft in squadron service 2 years before WW2 started.Get your facts straight.
As for Chinese built cars, There are over a 100 homegrown vehicle manufacturers in China, as well as joint production plants producing a wide variety of German, British,French, Italian, Japanese AND Korean cars, and some of GM's European designed cars, not the US models.All the joint production vehicles meet and exceed the quality standards of the original manufacturers.SAIC produces numerous models,including the latest VWs, and is China's second biggest vehicle producer.None of the major Chinese producers have any interest in exporting cars at present, because they cannot even supply the demand in the home market, meaning China is also a big importer of foreign cars.
As for comparing Chinese and Indian cars, don't make me laugh.Chinese cars are world quality. What decent car is produced in India? The last time I was in India, most of the production was of obsolete, old European cars. Just junk these days.That is why Indian companies like TATA are busy trying to buy up ailing European car manufacturers right now.Because they know European junk could be gold in India.
In fact comparing China with India at all is ridiculous, apart from the size of their respective populations. More than half of Indians are uneducated and live in squalor. The cities are filthy and full of beggars,with most inhabitants illiterate, barely existing from day to day,in slums without any sanitation.Cannot even afford a bicycle, never mind a car. How can that compare with beautiful China? The vast majority of Chinese have a decent place to live, and they ALL have plenty of food to eat and clothes to wear.More than half own their residence, and the favourite pastime of about a third of the common people is playing the stock exchange.
C H Ng
The first vehicles made in China were from Russian technology, long before the Germans or the French. Trucks and cars were built by F.A.W (First Auto Works!)in Chang Chun, Jilin province, which is now China's biggest vehicle manufacturer. Its factories are the equal in technology of any in the world,and FAW does R & D for VW.
All car manufacturers use the technology of others, most perfectly legally, through licencing.
As for your questions...
Inventor of computer-Charles Babbage,(1791-1871), English.
Inventor of Electronic Computer(And the one who invented the term). Alan Turing, English. First used at Manchester Unuiversity, England, in 1948.
Inventor of World Wide Web,Tim Birns-Lewe, English.
Interconnect
Complete rubbish!
China has no FTAs with anyone..yet.Neither does China commercially export cars.
Neither Hyundai or Kia has had any success exporting cars to Europe.
Toyota,Honda and Nissan have car plants in the UK that export most of them back to Japan, where they are renowned for being the highest quality. Their design centres are also in the UK.

@emenot

April 9, 2010 1:19 PM

@emenot, every country copied, copies, will copy something from some other countries. If you don't see a lawsuit, then it's not "steal" because that "thing" is not copyrightable! Got it, Empty vessel! American stole rocket science by harboring Nazi war criminal rocket scientists. How about that?

As to cyber-attack, again there is no proof who the real culprit was. It would be an agent from any country stealing bandwidth on Chinese soil doing the hacking. I bet it's too techy for your pinhead mind to understand.

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Bloomberg Businessweek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies.

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