Shanghai Automotive Industrial Corporation's Strategies for Global
Expansion
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Case Details:
Case Code : BSTR171
Case Length : 16 Pages
Period : 1984-2005
Organization : Shanghai Automotive Industrial Corporation
Pub Date : 2005
Teaching Note : Available
Countries : China
Themes: Expansion Strategies | Strategic Alliances | Acquisition
Industry : Auto and Ancillaries
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SAIC to Launch Own Car Brand Contd...
The Rover 75, which was first manufactured in 1999, was one of MG Rover's most
successful car models, and analysts said that the car, if manufactured by SAIC,
would provide tough competition to the brands manufactured by SAIC's partners
Volkswagen and GM.
In preparation for launching its own brand, SAIC had begun ramping up R&D and
technology at its production base at Yizheng. Observers said that launching its
own car brand would be a major step towards achieving the status of a truly
global company for SAIC.
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Background Note
The automobile industry was classified as one of the 'pillar'
industries in China under the Industrial Policy announced in March 1994. Pillar
industries were defined as those that were in the third and last stage of
industrialization (denoting the highest level of industrialization).
The
automobile industry was primarily state-owned, although there were a few small
private companies manufacturing automobiles or parts.
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Shanghai was the biggest auto-manufacturing city in
China, contributing 80 percent of the country's total auto industry
profits. The turning point in the history of China's auto industry came
in 1984, when Volkswagen signed a joint venture deal with the
state-owned Shanghai Tractor & Automobile. This was China's first
automobile joint venture. China's first foreign passenger car, the VW
Santana, made an appearance one year later. In 1990, the Shanghai
government merged most of the smaller automobile enterprises in the
city, including Shanghai Tractor & Automobile, into one entity - the
SAIC. As a result, the SAIC produced a wide range of automobiles ranging
from components to cars to trucks, motorcycles and farm vehicles. |
In 1991, SAIC stopped producing its own line of cars so as to
strengthen the Volkswagen joint venture. In the mid-1990s, the Chinese
government opened up the automobile industry further to meet the increasing
demand for cars in the country.
GM and Ford Motor Company (Ford) were considered
for partnership with SAIC. Eventually, SAIC chose GM as its partner as the cars
manufactured by GM were considered to be more suitable for the Chinese market.
The Shanghai Auto-GM joint venture was established in 1997 with a capital of
$1.52 billion...
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