SAIC To Buy Ssangyong
China's largest automaker, Shanghai Automotive Industry
Corp., will buy South Korea's Ssangyong Motors by the
end of September. Exact terms of the deal were not disclosed.
The move will help SAIC to expand its production of sports
utility vehicles (SUVs) in China, which are becoming increasingly
popular among the country's young urban population, risig
32% in the past year. This is in spite of higher fuel
consumption and traffic and parking problems. Ssangyong,
based outside Seoul, makes the Rexton and Korando SUVs.
Banks took control of Ssangyong in 1999 after it went
bankrupt in 1999 when the Daewoo Group went under with
US$80 billion of debt. SAIC got the right to negotiate
for 48.9% control of the company.
SAIC says that it plans to keep research, development
and manufacturing in South Korea, and plans to invest
more on the development of new models.
SAIC is a manufacturing partner for General Motors and
Volkswagen in China, and is now the largest manufacturer
in China's booming market for automobiles. For the past
two years, China has had the single fastest
growing market in the world. In the past few months,
growth has slowed as the government has tightened controls
on auto loans. This however, is believed to be a cyclical
trend, not a prolonged secular trend.
The demand for automobiles has become so great that the
leading auto makers are expanding production by all available
means, even though it will mean that there will be an
auto glut in the future. The general feeling is that the
larger players, having captured market share, will be
able to ride it out, while many smaller under-capitalized
players will go under.
General Motors said that it was not offered a stake in
Ssangyong by SAIC, but said that it would consider a stake
if it were offered. In spite of some troubles over IP
protection with SAIC, the two sides have been able
to smooth out their differences.
Before you go, did you like this article?
If so, you can receive a free email newsletter version
each weekday. Sign up using the China Business Express
form on this page.
