(In Dec 27 story, corrects 11th paragraph to make clear VW owns Bentley and BMW owns Rolls-Royce cars)
SHANGHAI, Dec 27 (Reuters) - A deal struck this week puts a venerable British motoring brand in the hands of China's top car maker, raising hopes that Shanghai Automotive Co 600104.SS might do for MG what Germany's BMW did for the Mini.
Shanghai Auto on Wednesday agreed a $286 million dollar deal to acquire the vehicle and core auto parts operations of Nanjing Auto, an eastern China manufacturer which surprised car enthusiasts in 2005 by snapping up the MG brand and some other assets after the collapse of the British firm, MG Rover.
“Funding is obviously not a major concern now that the companies are joining forces,” said Chen Qiaoning, analyst at ABN AMRO TEDA Fund Management in Shanghai.
Last year it introduced the Roewe 750 to the Chinese market. The car is based on technology acquired from MG Rover and is priced to compete with Toyota Motor Corp.'s 7203.T locally-made Camry.
Nanjing Auto, for its part, announced a grand scheme to revive the MG marque when it rolled out its first MG sports cars and saloons, made at a plant in China, in April.
The distinctive MG badge dates back to around 1925 and is part of a rich history of British car manufacturing with a special connection to motor sport.
MG and other British motoring names including Rolls-Royce and Bentley, Jaguar, Aston Martin and Lotus all eventually needed to call upon foreign capital as car markets become more open and costs competition hit home.
India's Tata Motor TAMO.BO is set to buy Jaguar from Ford F.N. Volkswagen owns Bentley, BMW BMWG.DE owns Rolls-Royce while Aston Martin is owned by a consortium including Kuwait's Investment Dar TIDK.KW. Lotus belongs to Malaysia's Proton.
Nanjing Auto, which paid 53 million pounds ($105 million) for MG, has plans to return the brand to international prominence and make it fashionable among China’s emerging middle class.
Earlier this year, Nanjing Auto unveiled its first British-built MG TF sports cars at the Longbridge assembly plant in central England, ending a two-year production halt there.
The British production was intended to revive the marque internationally through sales in Europe and British Commonwealth countries, where the MG brand remains a household name.
But financing MG’s revival was clearly an issue for Nanjing Auto.
Zhang Xin, general manager of the Nanjing Auto subsidiary making the cars, said at the time that the subsidiary was seeking outside investors and was willing to sell as much as 50 percent of itself to help fund the project.
A Nanjing Auto executive, who declined to be named, told Reuters on Thursday that it had sold 3,000 MG 7 model cars in China since August -- not a large amount for a new model. Overseas sales have not begun, he said.
There is one potential legal clound on the horizon for the partners as the administrator to a failed Dutch unit of MG claims the European brand rights outside Britain. Wouter Verel at lawyers AKD was not available for comment on Thursday.
SAIC's ventures with General Motors GM.N and Volkswagen AG VOWG.DE are China's biggest car sellers. The SAIC group sold 1.25 million vehicles in the first 10 months of 2007, dwarfing Nanjing Auto's sales of 79,196 vehicles, industry data shows.
Apart from its majority stake in South Korea's Ssangyong Motor 003620.KS, SAIC does not have major car sales overseas.
SAIC Motor president Chen Hong told reporters on Wednesday that the Longbridge facility in Britain would serve as a platform for his firm to tap foreign markets with the MG brand.
Inside China, the outlook for the MG brand is complicated by the fact that SAIC has been promoting the Roewe, which uses technology similar to the MG 7 sedan series technology bought by Nanjing Auto.
But analysts believe SAIC may continue selling both Roewe and MG models by aiming at different market segments. MG cars in China have so far been priced slightly cheaper than Roewe cars.
“The next thing we will be focusing on is to clarify the market position of the Roewe and the MG, and differentiate the brands accordingly. That is vital for good sales,” said Liu Ningsheng, spokesman at Nanjing Auto.
While this issue may be resolved, the difficulties faced by the MG brand in the past show relaunching it may not be quick or easy, noted Chen at ABN AMRO TEDA Fund Management.
“They should buckle up and be well prepared for the bumpy road ahead,” he said. (GBP1 = $1.99) (Additional reporting by Alexandra Hudson in Amsterdam and David Cutler in London; Editing by Marcel Michelson and Andrew Callus)
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