Carpool: Chinese giants use idled foreign plants to fuel global expansion
Great Wall Motors, Geely and other Chinese carmakers are using an asset-light strategy to accelerate their growth overseas
Chinese carmakers, saddled with excess capacity and weak demand at home, are taking a new approach to global expansion: utilising idled facilities abandoned by international marques.
“Mindful of profitability as well as geopolitical and operating risks, Chinese carmakers are refraining from building overseas plants, but overcapacity facing the global auto industry is offering them opportunities to accelerate their ‘go-global’ pace,” said Gao Shen, an independent analyst in Shanghai. “Several companies are going with the idea of an asset-light strategy.”
Under a typical asset-light strategy, a company holds only a small amount of fixed assets on its balance sheet. This move would allow mainland Chinese automotive groups to form tie-ups with international counterparts to tap their redundant facilities and establish supply chains to assemble electric vehicles (EVs).
On Monday, Bloomberg reported that Mercedes-Benz Group was in talks with Chinese SUV maker GWM to share the German carmaker’s factory in the port city of East London, South Africa.
The report comes less than two months after Chinese state-owned carmaker Chery Automobile agreed to take over Nissan Motor’s manufacturing assets in Rosslyn, an industrial suburb outside Pretoria, South Africa.