China’s Domestic Automakers Take a Hit, But Not All the News is Bad

Jacob George

After years of significant sales growth and business expansion, China’s domestic automakers have been on the receiving end of bad news in recent months. Some recent examples of stumbling blocks for China’s national automakers include:

• Year-to-date, the combined market share of China’s domestic automakers—which typically accounts for about one-third of annual passenger-vehicle sales—is down nearly 4%, in an overall market that is up 9%.

• In July, an influential automotive industry association predicted that more than half of China’s 48 domestic automotive brands (a majority have only been established in the last dozen years) would be discontinued in the next 3-5 years, principally due to foreign competition.

• In August, two of China’s leading domestic brands were forced to announce vehicle recalls in Australia (due to the affected vehicles containing the banned substance, asbestos). This recall prompted sober admissions of wrongdoing from the offending companies.

Certainly, these setbacks have been disappointing for a young industry racing to catch up with the world’s leading automakers. However, based on progress being made in other facets of the industry, there is still a major reason for optimism among China’s domestic brands. One area in which much progress has been made is initial vehicle quality. Continue reading ›

Saab Exclusive Deal with China’s Hawtai Motor Falls Through

Note: Last week, Saab Automobile AB, owned by Spyker Cars NV, had agreed to produce passenger vehicles in China with Hawtai Motor Group, but this week failed to win approval from China’s authorities. Hawtai will continue to talk about cooperation on a non-exclusive basis, according to media reports. Meanwhile, Reuters reports that China’s Great Wall Motor* is continuing to talk with Spyker Cars about a potential alliance with Saab. Our China expert, Tim Dunne, director of global coordination, offers historical background and fresh insight.

Tim Dunne

From a historical perspective, Sweden’s Saab Automobiles—once one of the world’s most iconic and quirky premium automotive brands—has been drifting somewhat aimlessly for most of the past 20 years.

In 1989, when global automakers could see a shift toward luxury cars emerging—and when new premium brands like Lexus and Infiniti were being launched—General Motors (GM) purchased a 50% stake in Saab for $500 million.

After the acquisition, GM proceeded almost immediately to lose money on the deal, as Saab sales steadily declined from their peak of 187,000 units in 1987. After multiple management shakeups and repeated unsuccessful attempts to find a place for Saab in GM’s global product strategy, the Swedish brand was left mostly to languish, and the financial bleeding at Saab continued for the balance of the decade. Then, for reasons that are not entirely clear, GM bought the remaining 50% share of Saab in 2000, allowing the Big Three domestic automaker to absorb all of Saab’s financial losses, instead of just half of them. Continue reading ›