China's SAIC to Make Cars Under Own Brand

[Newbiewar]

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SHANGHAI, China (AP) - China's Shanghai Automotive Industry Corp., or SAIC, a longtime partner of General Motors and Volkswagen, said Thursday it has won government permission to build its own brand of car for the first time.

The automaker said it plans to launch its brand based on model designs bought from Britain's MG Rover Group Ltd.

The government's National Development and Reform Commission gave the go-ahead for a 3.68 billion yuan ($457 million) factory to be built in Shanghai's Baoshan district, with an annual capacity of 120,000 cars and 170,000 engines a year, the company said in a statement.

"The establishment of SAIC's own model car is a milestone for the company's strategy of international growth and it will speed up the development of its own international brand name ... and its competitiveness," SAIC chairman Hu Maoyan said in the statement, which didn't give further details.

Despite its thriving joint ventures with both General Motors Corp. and Germany's Volkswagen AG, SAIC has no models of its own -- it only produced GM or VW cars. The company's launch of its own brand name has been long expected.

SAIC said it expects to finish designing its model, which is based on the Rover 75 sedan platform, by the second half of this year.

SAIC pulled out of merger talks with bankrupt MG Rover Group Ltd. last year, but it owns the rights to Rover 25 and 75 technology.

Rival Chinese automaker Nanjing Automobile (Group) Corp. stepped in, buying MG Rover for just over 50 million pounds ($87 million) in July. This week, it signed a 33-year lease for MG Rover's Longbridge factory, in central England, where it plans to begin producing MGTF sports cars next year.

The Shanghai automaker announced last year ambitious plans to expand capacity and build more engine plants, proclaiming its ambition to enter global markets.

However, it faces strong competition both from international brands and up-and-coming domestic car makers like Chery Automobile Co. and Geely Automobile Co.

Investment in the auto industry exceeded $12.4 billion in 2005, according to figures reported by the government this week, with output capacity climbing to about 6.2 million units.

Meanwhile, profits have been falling amid intensifying competition, with the average profit rate for the industry falling to 8 percent last year from 45.7 percent in 2003, the official Xinhua News Agency reported.