Shanghai, Oct. 13 (Reuters): China’s third largest auto firm, Shanghai Automotive Industry Corp Group (SAIC), has joined General Motors in a joint venture with South Korea’s Daewoo Motor Co., the first Chinese auto maker to invest in a foreign one.
SAIC said on Sunday it would spend $ 59.7 million on a 10 per cent stake in GM Daewoo Auto and Technology Co, which will own three of the bankrupt South Korean firm’s manufacturing plants. The partnership would help Daewoo enter the fast-growing China market — its strength in sub-compact car production complementing the Buick sedans and family cars that GM and SAIC roll out at a Shanghai joint-venture plant.
For SAIC, one of the top three state-owned auto makers which the Chinese government wants to turn into globally competitive producers, the investment was unlikely to yield quick returns but could give it experience abroad, analysts said.
“SAIC’s equity participation in GM Daewoo is part of our ‘Go Abroad’ strategy,” SAIC president Hu Maoyuan said. “It is an important first step for the participation of China’s developing automotive industry in the international market.”
General Motors Corp, the world’s largest auto maker, agreed in April to take 42.1 per cent of the $ 597-million Daewoo venture to be launched this month. Japan’s Suzuki Motor Corp will take 14.9 per cent and Daewoo creditors 33 per cent.
Daewoo exports small cars to China, one of the world’s fastest growing auto markets. Steady economic growth is expected to push car sales to one million there this year. Daewoo’s cars are popular with Chinese because they are cheap, but to expand in a competitive market, foreign car makers need local operations to save on production costs.