GM and SAIC (Shanghai Automotive Industry Corporation Group) have formed a new joint venture in which each company holds an equal 50 percent stake. The new Hong Kong-based venture – General Motors SAIC Investment Limited – is meant to take advantage of the automotive industry’s long-term growth potential in India.
The newly-formed company will utilize GM’s two vehicle manufacturing plants and one powertrain facility in India that will produce small cars (from SAIC GM) and mini-commercial trucks (from SAIC-GM-Wuling). According to GM,
These products will join GM’s global vehicles, allowing GM India to quickly add entries in growing market segments.
These will be sold through GM’s distribution network in the country, that currently consists of 195 dealers and 198 service outlets.
Nick Reilly, president of GM’s International Operations (who will be making a transition to head GM Europe), had the following to say about the deal:
Over the past decade, SAIC and GM have created one of the world’s most successful automotive industry partnerships. Both companies felt this was the proper time to deepen cooperation beyond China’s borders in order to enhance our partnership as part of our individual companies’ long-term growth strategies.
GM expects the joint venture to be finalized in the first quarter of 2010 and believes that it will lead to more jobs being created in India.
SAIC and GM currently operate eight joint ventures in China and have been partners in the country since 1997. The tie-up is one of the most successful joint ventures between an American and Chinese company.
The GM Authority Take
Even though our article would suggest things are all nice and rosy, I would argue things aren’t really that great in reality: this new venture would give SAIC a 50 percent stake in GM’s operations in India while GM gets…. wait, GM doesn’t get anything in return here! GM’s cars will still be manufactured in India – as they are today – only now, GM will be sharing its profits with SAIC. It would be one thing if GM didn’t have any plants in India and was looking to enter the market on the cheap, with GM-SAIC producing the vehicles in China for export to India. That’s not the case here.
Perhaps GM received some money in exchange for SAIC’s stake in the new company, which it would use to pay off loans to the U.S. government? Maybe… but then again, GM’s entire press release doesn’t mention any financial figures related to the matter.
There is one thing: mini-commercial vehicles from SAIC-GM-Wuling that will be produced in India after the venture becomes official come Q1 2010. In fact, these trucks have been more successful in China than GM’s light vehicles. Check the numbers: through the end of November 2009, cumulative sales of the light trucks were 3,384,848, while total sales of cars were 2,973,411. Market trends tell us that India is currently hot for these types of vehicles for construction and maintenance work. So if this is the real reason for the new joint venture, how come Wuling – the third partner with SAIC And GM in the light truck venture – isn’t mentioned in the press release? Something’s not right here, but I can’t put my finger on it just yet. Stay tuned!
GM’s full press release is after the break, just in case you’re interested.
SAIC and GM Announce Expansion of Cooperation in Asia
- Form Hong Kong-based General Motors SAIC Investment Limited
- Will leverage resources in India and plan for other emerging markets
Shanghai – Shanghai Automotive Industry Corporation Group (SAIC) and General Motors Company announced today that the two automakers are expanding their cooperation in Asia.
SAIC and GM, which currently operate eight joint ventures in China, have formed a new 50-50 joint venture investment company, General Motors SAIC Investment Limited. Situated in Hong Kong, it will facilitate their expansion efforts. They also announced plans to leverage their resources to support expansion in emerging markets, beginning with India.
Based on the automotive industry’s long-term potential for growth in India, SAIC and GM have formulated a joint strategy for investment in the country. They will utilize GM’s two vehicle manufacturing facilities and a powertrain facility in India and GM’s nationwide distribution network in the formation of a new joint venture.
Small cars from Shanghai GM and mini-commercial vehicles from SAIC-GM-Wuling, SAIC and GM’s manufacturing joint ventures in China, will be produced and sold in India. These products will join GM’s global vehicles, allowing GM India to quickly add entries in growing market segments. The establishment of the India joint venture is expected to be finalized in the first quarter of 2010. GM believes the additional models and potential volume growth will result in the creation of more jobs in India.
“Changes in the worldwide economy have created new opportunities in emerging markets,” according to Hu Maoyuan, Chairman of SAIC. “By leveraging our individual assets and those of our China joint ventures, SAIC and GM are in a strong position to introduce competitive products outside China that will satisfy the needs of consumers in India and other high-potential global markets.”
“Over the past decade, SAIC and GM have created one of the world’s most successful automotive industry partnerships,” said Nick Reilly, GM Executive Vice President and President of GM International Operations. “Both companies felt this was the proper time to deepen cooperation beyond China’s borders in order to enhance our partnership as part of our individual companies’ long-term growth strategies.”
Both companies reached an agreement for GM to transfer 1 percent of its stake in Shanghai GM to SAIC Motor. This will assist China’s leading listed automotive company in consolidating Shanghai GM revenue into SAIC Motor, which will provide investors a clear understanding of its business. Shanghai GM management will continue to operate with the existing joint management structure and oversee operations of the joint venture.
SAIC and GM began cooperation in 1997, when the two automakers formed Shanghai GM and the Pan Asia Technical Automotive Center (PATAC) engineering and design joint venture. That was followed by the launch of six additional China joint ventures, including SAIC-GM-Wuling; GMAC-SAIC Automotive Finance Company, China’s first approved and operational automotive financing company; and Shanghai OnStar Telematics, which will provide a range of in-vehicle safety, security and communication services for selected Shanghai GM models starting this month.
Since it began regular production in 1999, Shanghai GM’s domestic sales have grown more than 22 times. Through the end of November 2009, Shanghai GM had sold 2,973,411 vehicles. Since its establishment in 2002, SAIC-GM-Wuling’s domestic sales have grown more than four times, with cumulative sales through the end of November 2009 totaling 3,384,848 units. It has been China’s leading producer of mini-commercial vehicles for the past three years. PATAC has played a key role in reengineering global products for both joint ventures in line with local preferences, regulations and driving conditions.
SAIC Motor Corporation, Limited (SAIC Motor), formally known as Shanghai Automotive Co., Ltd., went public on the Shanghai Stock Exchange in November 1997 with a stock code of 600104. It was restructured in 2006, and now SAIC Motor is the strongest listed vehicle corporation on the A-share stock market in China. As of December 31, 2008, SAIC Motor owned total capital stock of 6.55 billion shares, had consolidated assets of RMB 107.86 billion and had employee headcount of more than 60,000. Its controlling shareholder is SAIC Group.
General Motors Company, one of the world’s largest automakers, traces its roots back to 1908. With its global headquarters in Detroit, GM employs 209,000 people in every major region of the world and does business in some 140 countries. GM and its strategic partners produce cars and trucks in 34 countries, and sell and service these vehicles through the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Opel, Vauxhall and Wuling. GM is the joint global automobile partner of World Expo 2010 Shanghai along with SAIC. More information on the new General Motors Company can be found at www.gm.com.
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