China's BAIC eyes overseas expansion

DETROIT Tue Jan 11, 2011 11:52pm EST

DETROIT (Reuters) - Even before it launches the first passenger cars under its own brand at home, China's BAIC has set its sights on expansion overseas.

"If you want to be a sustainable automaker, you have to be global," Wang Dazong, president of Beijing Automotive, told Reuters on the sidelines of the Detroit auto show.

"I think we need to be a global player. If you are not, sooner or later, you will be in trouble."

Wang said BAIC, China's fifth-largest automaker, would make its first push toward growth outside China with its Foton-brand commercial truck aimed at emerging markets.

But Wang, an engineer who spent 20 years working at General Motors Co (GM.N) before returning to China in 2006, said he expected BAIC to compete in the future in the United States and Europe with its own passenger cars.

State-run BAIC plans to roll out 21 models under its own brand in China over the next five years in a growth plan jump-started by its 2009 acquisition of technology from what was GM's Saab unit.

The first of the new BAIC-branded vehicles based on the Saab technology BAIC acquired for $200 million is set to go on sale in China this year.

In addition to the three vehicle platforms it acquired from Saab, BAIC also has three SUV platforms and two city car vehicle platforms it developed on its own.

BAIC produces vehicles in partnership with Germany's Daimler AG (DAIGn.DE) under the Mercedes brand, and for Hyundai Motor Co (005380.KS) in China under the South Korean automaker's brand.

It also makes commercial trucks under the Foton brand.

Wang said BAIC was looking first to sell Foton trucks and buses in five developing markets: India, Russia, Mexico, Thailand and Brazil.

BAIC already has a partnership with Daimler on the commercial truck market in China, but it is looking for other partners in its key overseas markets for both distribution and manufacturing, Wang said.

Wang said he expected China's auto market would grow by about 10 percent in 2011, a marked slowdown from the past decade when growth has averaged over 20 percent.

In 2010, China vehicle sales including trucks or buses were up by almost a third to 18.1 million units, making it the world's largest market by a wide margin.

"Of course, we have been wrong before, but this year everyone is forecasting on the lower side," Wang said.

GRIDLOCK, REGULATION

Recent steps to limit the number of cars sold in Beijing to about 240,000 this year -- roughly a third of the 2010 figure -- will be one factor curtailing sales, he said.

BAIC sold roughly 1.5 million vehicles in 2010 and about 85,000 of those were sold in the Beijing area, Wang said.

"It will have some impact," he said, referring to the Beijing regulation.

Wang said he hoped other Chinese cities would not follow the lead of Beijing in tackling the problem of gridlock.

"We need to solve the traffic problem but the traffic problem is not only the number of cars. Tokyo has more cars. New York has more cars. We need to look at the situation overall," he said.

Wang expected China's industry-wide auto sales would rise to 40 million vehicles annually by 2020. By comparison, global auto sales were near 72 million vehicles in 2010.

Wang, who holds a doctorate in engineering from Cornell and professes an admiration for GM chairman Alfred Sloan, said he expected BAIC would be back to the Detroit auto show with a vehicle to unveil for the U.S. market at some point.

"It may not be me by then. It may be someone else with Beijing Auto," he said.

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