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BAIC Group eyes independent brand breakthrough with establishment of BAIC Motor

by Alfred Tian & Lei Xing

BEIJING – Beijing Automotive Industry (Holding) Corp. (BAIC), announced on September 28 the establishment of BAIC Motor Corp. Ltd. (BAIC Motor), a new company that will pool together assets from several of BAIC’s subsidiaries to focus exclusively on independent brand passenger vehicles, and eventually eye an IPO.

BAIC, China’s 5th largest automaker by sales volume, also announced a new group name, Beijing Automotive Group Co., Ltd. (BAIC Group), and unveiled a new group logo, signaling a new milestone for the 52-year old automaker.

With a total registered capital of ¥5 billion ($746 million), BAIC Motor was jointly founded by six major shareholders, with BAIC Group as a controlling shareholder with 51 percent of the shares. BAIC Group will inject cash, shares and assets of its current subsidiaries into BAIC Motor, including shares in its joint ventures with Hyundai and Daimler, passenger vehicle and SUV divisions, new energy vehicle division as well as its supplier and powertrain divisions. Shares and assets of Beiqi-Foton, BAIC Group’s commercial vehicle subsidiary and China’s largest light commercial vehicle manufacturer, however, are not included.

Capital Steel, which has been a supplier of BAIC Group and its subsidiaries, will take up 18.31 percent shares as the second largest shareholder. The remaining shareholders are Beijing State-owned Asset Management Co., Ltd., Modern Innovation Holding Co., Ltd., Beijing State-owned Asset Management Administration Center and Beijing Energy Investment (Group) Corp., taking up 13.18, 7.75, 5 and 4.76 percent respectively of BAIC Motor’s shares.

Xu Heyi, chairman of BAIC Group, will serve as chairman of BAIC Motor, while Han Yonggui, vice president of BAIC Group, will serve as BAIC Motor’s president.

“BAIC Motor will help BAIC Group to become a domestic first-class and internationally-known automotive group. It will exclusively focus on the development of independent brand passenger vehicles and new energy vehicles for BAIC Group,” said Xu Heyi. Xu also indicated that BAIC Motor is expected to be public-listed as soon as the relative authorities approve it, a process which industry experts expect will take at least two years. 

“The establishment of BAIC Motor serves three major purposes,” said Han Yonggui. “First, it will help open up a financing platform; second, it provides a more robust enterprise management system; and third, it is to integrate BAIC Group’s passenger vehicle resources and assets.”

Independent brand development on fast lane

Compared with other leading Chinese automakers such as SAIC, FAW, Dongfeng and Chang’an, BAIC Group has been relatively behind in terms of independent brand, lacking a competing model as far as passenger vehicles are concerned.

However, with the establishment of BAIC Motor, BAIC Group hopes to take its independent brand development on the fast lane by building on existing resources and experiences such as working with multinational automakers such as Hyundai and Daimler, “know-how” achieved through the acquisition of Saab vehicle platforms and engine technologies, as well as its research, passenger vehicle, powertrain and new energy vehicle divisions established in 2007.

Talent wise, BAIC Group has attracted close to 1,000 people to join the company over the last two years, including 29 “overseas returnees” in key positions as well as expatriate Saab engineers. In the next two to three years, it expects to increase its independent brand passenger vehicle R&D team to more than 1,000 people, one-third of which will be “overseas returnees.”

BAIC Group has also been on the move recently as far as expanding its passenger vehicle geographical footprint outside of Beijing. Just in August alone, it acquired Chongqing Yinxiang Group and Guangzhou Baolong Light Vehicle for the production of passenger vehicles. Combined with the existing passenger vehicle production base in Zhuzhou of Hunan Province and high-end passenger vehicle production and R&D base that will soon begin construction in Shunyi District of Beijing, BAIC Group now has production footprints in Western, Southern and Central China in addition to its home base in Beijing.

In the next five years, BAIC Motor will have five passenger car platforms, three SUV platforms and a minivan platform. By 2015, it plans to launch over 20 models under these vehicle platforms. The first independent brand vehicle, the C301 passenger car, will begin production in October and is expected to be launched in early 2011. The company is also working to unveil its first independent high-end car in mid-2011 based on Saab technologies that it purchased in 2009. BAIC Motor has a target of producing and selling 100,000 independent brand passenger vehicles in 2011. By 2015, it hopes to realize an annual production capacity of 700,000 independent brand passenger vehicles.

BAIC Group sold 963,000 vehicles in the first eight months of 2010, up 21.4 percent from the same period in 2009, and is expected to achieve its goal of selling 1.5 million vehicles with ¥150 billion ($22.39 billion) in sales revenues for the year. Its overall strategy for the next five years is to enter into Fortune 500 list and become one of the top 15 automakers in the world by 2015.

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