Hesitant SAIC Eyes SE Asia 踌躇的上汽关注东南亚市场
Just a month after I accused SAIC (Shanghai: 600104) of having a weak stomach for overseas expansion, we’re getting word that China’s leading automaker may be preparing to move into Southeast Asia with its longtime US partner General Motors (NYSE: GM). If the reports are correct, this would look like a smart move for SAIC, taking it into a relatively straightforward region similar to its own home market in partnership with a globally experienced major partner like GM.
If SAIC wants to ever become a serious global player, it will need to take such steps abroad and compete in other countries where it doesn’t enjoy the clear home field advantage it has in China. I also like the fact that SAIC would be taking the step with GM, unlike other outwardly-focused Chinese car makers like Geely (HKEx: 175) and Chery that are quickly discovering the outside world can be a difficult place. (previous post)
Let’s take a look at the latest reports, which say that GM’s new China head has hinted at a partnership with SAIC to sell their cars in Southeast Asian markets like Thailand and Malaysia. (English article) The specific report quotes Bob Socia, who took over as head of GM’s China operation last month, saying that the no-frills products being manufactured at GM’s joint venture with SAIC work well in emerging markets, and that the pair could take their business model to Southeast Asia.
The report, which comes from Reuters, is indeed making several major assumptions, since Socia never says outright that the pair would enter Southeast Asia through a new joint venture. They could just as easily test the market first by exporting some of their most successful low-cost models to the region first, most notably the Chevy Sail, which was launched less than 3 years ago and has since then gone on to become one of China’s top selling models.
But regardless of what approach they finally take, I really do think that SAIC needs to look beyond its home China market and that this potential move into Southeast Asia looks like a good first step. Such a move would allow SAIC to stay within its comfort zone by tapping other emerging markets that share many similar qualities in China. What’s more, having GM as a partner could help to ease some of SAIC’s concerns about repeating some of its past mistakes in its earlier forays abroad.
People familiar with SAIC will know that I’m referring most directly to SAIC’s 2004 purchase of South Korea’s Ssangyong, which ended in disaster when the company ultimately became insolvent and SAIC had to deal with numerous complicated labor issues and ended up writing off the entire investment. More recently, SAIC let GM buy out most of its stake in their Indian joint venture, in what looked like a premature move since the venture itself was only a couple of years old. (previous post)
Of course any kind of move abroad is difficult and fraught with risk, especially in a capital intensive and highly competitive industry like auto making. Chery and Geely are quickly discovering that reality, with both companies running into a number of difficulties as they try to both export and manufacture abroad. But such moves are necessary for Chinese automakers, especially as they face stiff competition in their home market from foreign rivals. Accordingly, I would be both encouraged and excited to see SAIC take this step into Southeast Asia with GM, which should stand a strong chance of success if and when it happens.
Bottom line: A move by SAIC with longtime partner GM into Southeast Asia would mark a smart step outside its home China market, with a strong chance of success if it happens.
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