Mainland carmaker Huachen Auto is poised to incorporate the latest engine technology of its European partner, BMW, into its sedans and sport utility vehicles - a move analysts say will give it the upper hand over its rivals as it ventures into the medium to high-end car sector.
Brilliance Auto - the listed arm of Huachen that makes BMW vehicles on the mainland - said its minivan, the Jinbei, would be in a position to compete with Buick's GL8 and Mercedes-Benz's Viano when it was fitted with BMW's N20 engine by the end of next year.
Brilliance chairman Wu Xiaoan said the upgrade would more than triple prices to 200,000 yuan (HK$253,000) from between 50,000 and 60,000 yuan.
"The N20 engine is too big for our sedans and SUV, but we have plans to put BMW's next engine into our Zhonghua vehicles," he said.
Xinchen Power, the engine-making arm of Huachen, hit the headlines this month when it announced it had become the first mainland company to win an engine assembly contract from BMW.
Wu, who is also the chairman of Xinchen, told the South China Morning Post last week that the group aspired to become a first-tier supplier for BMW's next-generation engine under the guidance of BMW engineers.
"We hope this transfer of technology can benefit our local engine platform XCE, since it's the first time that a Chinese company will participate in the manufacturing process of a core car component. BMW and a global consultancy firm will also look into our business models and help to improve productivity and efficiency," he said.
While assembly and sourcing of BMW's engines would be a lucrative business, Wu said it was also important for the group to improve its own engine platform with the new technology. This could help Huachen's domestic low to medium-priced models Zhonghua and Jinbei move up the product line.
John Zeng, a director at consultant firm LMC Automotive, said while Brilliance Auto had an advantage against other domestic rivals with BMW's support, it was easier said than done for a mainland car brand to tap the medium and high-end car sector, which is dominated by foreign firms such as Toyota, Nissan, and Volkswagen.
"Shanghai Automotive's indigenous Roewe 950 model, for example, sells for 200,000 yuan and is classified as a medium to high-end vehicle. But its market reception is simply incomparable to its foreign competitors," Zeng said. "It is not just about the technology, but also the market's perception of your brand, which takes time to build."
Guenter Wollny, a senior vice-president of project consulting at BMW, said the group was happy to help Huachen grow so they could have a stable and reliable partner in the world's largest car market. In the meantime, he believes, it would take many years before Huachen could pose a threat to BMW's premium car business on the mainland.
Tallied together, 80,200 Zhonghua and Jinbei models were sold in the first five months of this year, a year-on-year increase of 3.29 per cent, according to mainland search engine Sohu's online car database. But Jinbei sales alone were down 17.94 per cent over the same period because of a lack of new models.