China Auto News: Geely, Maybach, Volkswagen

    Although the week is only halfway over, there's been a great deal of action in the Chinese auto market.
    Jing DailyAuthor
      Published   in Finance

    A Roundup Of Some Of This Week's Top China Auto Market Stories#

    Although the week is only halfway over, there's been a great deal of action in the Chinese auto market.

    BYD Eyeing Maybach? A Chinese Maybach?

    Speculation -- quickly denied -- this week about the future of Daimler's imperiled ultra-luxury marque Maybach. From the New York Times:

    The Guangzhou Daily and other local media said Monday that Chinese car and battery maker BYD was weighing the possibility of taking over Maybach from Daimler and that it would make a move once the brand was put up for sale, Reuters said.

    “Maybach is an important part of Daimler’s product portfolio. There is no other decision,” a Daimler spokesman told Reuters.

    Paul Lin, a spokesman at BYD in the southern Chinese boomtown of Shenzhen, where the firm is based, also denied the reports, the news service said. “It’s not true, it’s market speculation. We got calls from the media and we have checked with Chairman Wang,” Lin said, referring to Wang Chuanfu, chairman of BYD. Asked whether BYD had had any initial contact with Daimler on buying Maybach, he replied: “No.”

    The Guangzhou Daily article mentioned by the New York Times and Reuters includes some interesting commentary on the possibility of BYD acquiring Maybach, even though both sides deny that such an acquisition will ever take place and Daimler CEO Dieter Zetsche has stated that his company plans to close down the marque within the next two years. If nothing else, these observations include some valuable insight into the mindset of Chinese auto industry insiders about how to boost the reputation and visibility of young Chinese auto brands in the global marketplace (translation by Jing Daily team):

    Experts optimistic about BYD acquiring Maybach

    One has been in the young Chinese auto market for less than 10 years, with main vehicle prices less than 100,000 RMB ($14,650), the other has nearly 100 years of history, standing at the summit of the world's auto brands among Europe's most opulent luxury automakers.

    So what's the likelihood of BYD successfully acquiring Maybach? Even if the acquisition goes through, can a young brand like BYD actually operate this brand well? Against all odds, quite a few Chinese auto experts are optimistic about BYD's prospects for acquiring and successfully managing Maybach.

    On March 23, seasoned auto industry analyst Han Song said in an interview, "Personally, I feel very optimistic about the idea of BYD acquiring Maybach. BYD has several advantages that would ensure that it could successfully purchase and manage a brand like Maybach. First, BYD is an international company with experience in international operations; Second, BYD has a good image overseas, Warren Buffett has invested in it, and its cooperation with Daimler on new energy vehicles has further boosted its image internationally; Third, BYD has its own core technology, which could help Maybach's future operations; and finally, BYD and Daimler's cooperative relationship indicates that the likelihood of BYD acquiring Maybach is very high."

    A story to keep an eye on, but worth taking with a considerable grain of salt.

    Geely Finalizes Deal To Purchase Volvo#

    Jing Daily

    Zhejiang-based Geely's long-delayed takeover of the loss-making Swedish carmaker was finalized this week, as Geely agreed to pay $1.8 billion to purchase the company from Ford Motor Co. All told, Geely will spend about $2.7 billion for the acquisition -- the original price plus $900 million in working capital. From Channel News Asia:

    Volvo will give Geely the "perfect platform" to improve its own product line and enhance its image in China, where it has struggled to make an impact, said Jerry Huang, a Shanghai-based analyst with research firm CSM Worldwide.

    Geely has become one of China's largest private carmakers since launching its auto manufacturing business in 1997. It has an annual production capacity of 300,000 cars, but has sold less than 200,000 units abroad since 1997.

    "There is quite a big gap between Geely's product line and brand awareness and those of Volvo's," said Huang.

    "Geely gets a platform to learn and gain experience in the industry."

    As Jing Daily wrote around the time of Volvo and Geely's initial deal announcement, a Chinese-owned Volvo could see the long-suffering Swedish marque turn its fortunes around almost overnight. Since Beijing requires that at least 50% of government vehicles must be Chinese brands, Volvo will exist in a sort of gray area that could very well propel it past the ubiquitous black Audi A6s long preferred by government officials. Though it will take some time to see whether Volvo's biggest challenge in coming years will be to sell future "Made in China" Volvos outside of China or to foreign-brand-mad car buyers inside the country, the China market may just save the brand.

    VW To Target Chinese Millionaires With $88,000 Phaeton Revamp#

    Jing Daily

    Volkswagen will unveil its new $88,000 Phaeton at next month's Beijing Auto Show, sources tell BusinessWeek:

    VW, which withdrew the Phaeton from the U.S. in 2006 after a sales flop, is designing new front and rear sections, an interior upgrade and a wider selection of engines for the car, said the people, who declined to be identified because the revisions aren’t public. The model will be presented on April 23, before the start of the Beijing event, instead of in the second half as previously planned, they said.

    According to Stefan Bratzel, director of the Center of Automotive at the University of Applied Sciences in Bergisch Gladbach, Germany, “Success in China is absolutely crucial for Volkswagen’s expansion goals. Selecting China as the venue for the launch of the new Phaeton proves VW’s commitment to this vast market.”

    By launching the updated Phaeton in China, VW will likely get a great deal of free press (and goodwill) there, akin to that seen by Porsche last year when it launched its Panamera Turbo at the Shanghai Auto Show. But will Chinese millionaires be interested in throwing down nearly $100,000 for a Volkswagen? Clearly, wealthy Americans weren't. But we'll have to wait and see how it pans out in China. After all, China has a way of injecting new life into moribund auto marques and models. (Roewe and MG immediately spring to mind.)

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