BAIC to develop own brand with Saab tech

Beijing Automotive Industry Holding Corp (BAIC), China's fifth-largest automaker, will launch an aggressive campaign to develop its brand both at home and overseas, after buying car designs from General Motors' Saab unit.

BAIC said it will invest 33 billion yuan ($4.8 billion) in vehicle R&D over three years, after paying $200 million for the Saab technology, including the rights to three overall vehicle platforms and two engine technologies.

"Someone has commented that the purchase of Saab's intellectual property can help cut short the development time for Beijing Auto's own-brand passenger vehicles by 4-5 years," BAIC Chairman Xu Heyi told reporters on Wednesday.

"We basically agree with the view."

The Chinese car maker plans to immediately start integrating Saab technology into its vehicles with an aim to sell 100,000 self-developed passenger vehicles in 2011, Xu said.

Construction of a production facility with annual capacity of 150,000 passenger vehicles will be complete in 2011, he added.

The sales target is a bit aggressive, said Tan Kunyuan, an analyst at Changjiang Securities. "It will take at least a year for the market to recognise the brand and BAIC probably would need to modify the appearance of Saab cars to fit with Chinese market demand."

China overtook the United States this year as the world's largest auto market, as sales soared after Beijing rolled out a series of incentives designed to stimulate consumer spending during the global downturn.

However, there is still a significant technology gap between domestic Chinese automakers and their global rivals, which has left Chinese looking for acquisitions of overseas technology and designs as the global auto industry restructures.

Homegrown car maker Zhejiang Geely Holding Group, parent of Geely Auto, is in talks to buy Ford Motor's Volvo unit, and Sichuan Tengzhong Heavy Industrial Machinery is buying GM's Hummer brand.

Xu said BAIC posted net profit of 6 billion yuan on revenue of 116 billion yuan for 2009, selling 1.24 million vehicles.

The Beijing-based automaker is in production partnership with Daimler and Hyundai Motor, with most of their joint output for sale in the domestic market.

IPO PLAN

BAIC, which has a 20 billion yuan line of credit from Bank of China, is also making plans for an initial public offering, Xu said, though he declined to give details, including where the company would list.