SAIC plans 3.6b yuan plant for Rover-style cars

PUBLISHED : Friday, 29 July, 2005, 12:00am
UPDATED : Friday, 29 July, 2005, 12:00am

Shanghai Auto Industry Corp yesterday announced it would spend 3.68 billion yuan on a new plant to make cars using technology from Rover and Ssangyong. The models will be sold at home and abroad under SAIC's own brand name.

In a notice in the Shanghai Securities News, Shanghai Automotive, SAIC's listed arm, said its board had approved a plan to invest the money in a new company, Shanghai Luwei Auto, with an initial annual manufacturing capacity of 120,000 vehicles and 170,000 engines.

The plan puts SAIC in direct competition with its two joint venture partners, Volkswagen and General Motors.

Last year, their ventures with SAIC produced 617,000 cars, accounting for 73 per cent of SAIC's total output of 848,000 vehicles.

The Shanghai Luwei plant will be in Yizheng, Jiangsu province, at a site owned by SAIC originally intended to produce Santana cars for its joint venture with Volkswagen. But the plan was never implemented.

SAIC will own 40 per cent of the shares of Shanghai Luwei, with the remainder held by the listed company.

Shanghai Luwei will use technology SAIC acquired in two foreign purchases last year - designs from Ssangyong Auto, the fourth-largest carmaker in South Korea, and MG Rover's 25 and 75 series. The Rover designs were bought for #67 million ($908.45 million) before the British firm went bankrupt.

The first car is due off the production line in the first quarter of 2007.

'We will use advanced science and technology to develop new, high-quality products under our brand name that are internationally competitive and expand our market share at home and abroad,' the announcement said.

The ownership of MG Rover's technology has been complicated by the decision of administrator PricewaterhouseCoopers last week to sell the bankrupt company to Nanjing Automobile Group, despite a rival offer by SAIC that was preferred by British labour unions.

SAIC said it would use all legal means to protect its ownership of the intellectual property rights of the Rover 25 and 75 series and threatened legal action against any infringement.

Earlier this week, the Nanjing firm said it was prepared to co-operate with other companies, including SAIC, in using the assets it had acquired from Rover and that it would not use the Rover brand name.

Some in the industry believe that Beijing may negotiate a deal between the two Chinese companies.