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.