Three car giants invest 40b yuan for brand development

China’s three domestic car giants plan to invest a total of 40 billion yuan (US$5.28 billion) in their latest programs to develop brands with independent intellectual property rights (IPRs), Guangzhou Daily reported today. 
    
The three companies are First Automobile Works (FAW) Corporation, Shanghai Automotive Co Ltd, and Dongfeng Motor Corporation. 
    
"The three carmakers take a nearly 50 percent market share in China, and their ambitious bids on brands with independent IPRs could usher in a new era for the Chinese auto industry." said an auto expert. 
    
The 11th Five-Year Plan blueprints a 50 percent share for domestic car brands with independent IPRs. In the first half this year, a total 659,800 cars with independent IPRs were sold domestically, accounting for 30 percent of the total car sales in China. 
     
At the 54th anniversary of FAW’s establishment on July 15, the group disclosed its medium- and long-term technological development plan, in which FAW Group sets aside 13 billion yuan (US$1.71 billion) to develop its proprietary brands. 
    
Specifically, some 8.8 billion yuan will be used for designing new models, another 2.5 billion yuan for developing software and hardware, and the remaining 1.7 billion yuan for 229 primary auto technologies. 
    
By 2015, FAW will have four sedan platforms and an output capacity of one million passenger cars. The group also plans to release new models every year, beginning next year, and have 50 independently developed passenger car mode ls in the next eight years, covering all the market segments. 
    
Currently, FAW’s first independently developed sedan engine has been designed and will enter into mass production in Tianjin. 
    
Furthermore, FAW is planning to list in the stock market. 
    
Shanghai Automotive budgeted over 27 billion yuan (US$3.56 billion) for the next five years. Of the total, some 21.4 billion yuan or nearly 80 percent will be utilized in designing new engines and compete sedans with independent IPRs, as well as in building a technical center. 
     
 It has mapped out several steps in developing models with independent IPRs. First, based on Rover’s technology, which was purchased by Shanghai Automotive in 2004, the carmaker will inject 3.68 billion yuan into developing economy, medium range, and high end cars, as well as four-cylinder inline and V-shaped six-cylinder engines. Then the company will have a yearly output capacity of 120,000 sedans and 170,000 engines. 
    
Second, Shanghai Automotive will employ 3.67 billion yuan expanding its yield capacity to 150,000 independently-developed sedans and the same number of engines per year. 
    
Third, it will utilize about one billion yuan to upgrade Ssangyong sport utility vehicles (SUVs) and have an annual capacity of 24,000 SUVs. 
    
To further promote its own brands, Shanghai Automotive has reached agreements with Yuejin Group, the biggest shareholder of Nanjing Automobile Corporation (NAC), to consolidate their cooperation in the Roewe and the MG pr ojects. 
    
To finance such an enormous independent development program, Shanghai Automotive has issued a total 16 billion yuan (US$2.1 billion) of convertible bonds. 
    
At the end of July, the passenger cars department of Dongfeng Motor Corporation was set up in Wuhan, capital of Hubei Province. Li Shaozhu, deputy general manager of Dongfeng, was appointed as its general manager. 
    
Dongfeng financed about 10 billion yuan in its independently developed passenger cars program. The new plant will be seated in Wuhan’s Handunkou economic development zone, and the ultimate annual production capacity will reach 330,000 sedans. The first phase construction of the new plant, with an investment of 3.6 billion yuan, will start next month and be completed next year. The second phase construction and the program to develop engines with independent IPRs are expected to start in 2010. 
    
Dongfeng has set aside 600 million yuan to build an independent development and research center, and the first independently developed sedan model is scheduled to come out at the end of next year. Its first sedan will imitate the Elysee, manufactured by Dongfeng Peugeot Citroen Co Ltd, and branded as Shuangyan, whose engine displacement is between 1.6 and 2.0 liters. 
    
Additionally, Dongfeng Liuzhou and Dongfeng Yu’an, two subsidiaries of Dongfeng, also plan to release their own sedans.