Mid-Range MG 6 Launches In Shanghai: Could Chinese Luxury Cars Be Far Behind?

    Though 2009 has been a banner year for the Chinese auto industry, Chinese automakers themselves have had little luck significantly increasing their export figures or effecting much industry consolidation. But this may change next year.
    Jing DailyAuthor
      Published   in Finance

    MG 6 Looks Like China's Best Chance At Cracking International Markets, With Manufacturing In UK Expected By Late 2010#

    Though 2009 has been a banner year for the Chinese auto industry (and for the China operations of automakers like Buick), Chinese automakers themselves have had little luck significantly increasing their export figures or effecting much industry consolidation. Despite some moves in the right direction -- like BYD's ambitious plan to enter the US market in 2010 -- it looks like it will still be a while until we see a significant number of Chinese cars for sale in Western markets.

    Obstacles be damned, China's largest automakers have taken advantage of the global economic downturn and its devastating effects on some well-established brands shortcut their way into lucrative international markets. Snapping up distressed brands like Volvo (a priority for Geely) and Saab (Beijing Auto's current and possibly futile endeavor) would boost the international access and technological capacity of these Chinese companies and -- Geely and BAIC hope -- help them gain real footholds in high-profit markets.

    This is a smart move, because Geely's current bread and butter remains low-cost, entry-level vehicles in its home market.

    As BusinessWeek wrote this week, building and exporting higher profit-margin vehicles (something these companies can only accomplish through upgrading technology and quality control, and/or expensive and time-intensive marketing efforts) is critical for China's largest automakers if they expect to take leadership positions:

    China's 100-plus automakers are wrestling with low margins because of competition and a preference for low-priced models. Carmakers get an average profit per vehicle of between $1,000 and $3,000 in China, depending on model size, compared with about $10,000 in the U.S., according to Endo.

    "There's a huge gap in profit between China and the U.S.," said Yale Zhang, a Shanghai-based director at CSM Asia, an auto consulting company. "It may take China three to five years to surpass the U.S. in terms of profit."

    About 20 percent of China's auto sales are low-cost commercial vehicles that sell for as little as $5,000, Zhang said.

    Although the acquisitions of Volvo by Geely and Saab by BAIC are by no means done deals, and as with most major deals of this size still remain speculative, another Chinese-owned automaker of Western lineage is set to leapfrog into overseas markets in as soon as one year. MG, the formerly British automaker purchased by Nanjing Auto in 2005 (and incorporated into SAIC two years later), should be exporting cars back to its home country by Q4 2010. MG's new MG6, which premiered yesterday in Shanghai, is set to take on international markets (as well as the domestic market) and directly compete with comparable mid-range vehicles like the Toyota Corolla and Honda Civic. Hardly a luxury vehicle on par with the Mercedes C-class or BMW 3 Series, but a step in the right direction for Chinese automakers.

    From Shanghai Daily:

    The MG 6 mid-class hatchback, equipped with a 1.8-liter turbo engine, will be produced by SAIC Motor Passenger Vehicle Co in a plant in Lingang.

    "There will be market potential for the MG 6 if SAIC prices the car competitively," said Ye Sheng, an auto analyst at automotive consulting firm, B. Thinking Management, in Shanghai.

    The nation's biggest car maker will also start production of the MG 6 in a plant in the United Kingdom next year as it tries to revive the 85-year history of the British icon globally. It said the MG 6, which debuted at the Shanghai auto show in April, is specifically designed for Asian and European markets.

    SAIC has operated the sporty MG brand as its own since the car maker acquired smaller domestic rival Nanjing Auto at the end of 2007. SAIC now produces the MG 7, MG 3SW and MG TF sports car in China as well as the Roewe series that came from the Rover Group of the UK.

    Despite its western pedigree, MG remains first and foremost a brand focused on the Chinese market first and overseas markets second, and if it can assuage western concerns about product safety and quality upon its British launch next year, it could give Chinese (or at least Chinese-owned) car companies a much-needed PR boost.

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