SAIC to march into overseas light CV market

Chinese automobile tycoon Shanghai Automotive Industry Corporation (Group) (SAIC) expects to make inroads into the high-profit overseas light-duty CV (commercial vehicle) market, resorting to the perfect global business network of Nanjing Iveco Motor Co., Ltd.

Last yearend, SAIC successfully acquired all auto assets of Nanjing Iveco Motor' parent Yuejin Motor (Group) Corp. for around CNY 10.738 billion, and then became the ultimate controller of Nanjing Iveco Motor, which owns more than 1,000 outlets across the world.

Of course, the Shanghai-headquartered carmaker will not withdraw from the fast-growing light-duty truck market in Mainland China. Over 900,000 light-duty trucks were sold here in the entire 2007, and the total sales volume for this year is predicted to beat 1 million units.

But the gross profit margin of the domestic light-duty truck sector just stood at between 5.1% and 6% from 2003 to 2006, and even decreased by 1.0 percentage points again in 2007 due to escalating aw material prices, said people with the direct knowledge of the matter.

At the inception of July 2008, several large-scale light truck companies triggered a new round of price war, and prices of some car models were cut by CNY 8,000 to CNY 10,000. In particular, the reduction accounted for about 10% of the unit price of one complete light-duty truck.

The China Association of Automobile Manufacturers (CAAM) announced that there were at least 40 light truck producers and thousands of product varieties in China, but the small- and medium-sized ones did not have any advantage amid the furious competition. Annually, some companies are just capable of manufacturing and selling not more than 1,000 light-duty trucks.

SAIC Motor Co., Ltd. (SHSE: 600104), one of SAIC's listed arms, recently put its new production base located in the Shanghai Lingang New City into operation, and this base is expected to roll out the company's self-developed sedan Roewe 550, the next-generation Roewe 750, and some MG-branded car models in succession.

Attracting a total investment of CNY 2.9 billion, the new base is composed of five workshops involved in pressing, body, painting, assembling, and engine workshops, respectively, and its designed annual production capacity will likely reach 150,000 units before 2010.

The SAIC Motor Board Direct Chen Zhixin lately expressed his confidence that the Lingang-located base would take a lead in terms of production technology in the following 30 years.