SAIC: Strategies for own-brand growth
New Indonesian and Thai plants for Wuling and MG brand production
The SAIC Motor Group is the leading passenger-car and commercial-vehicle OEM in China. The Group has several affiliated brands, such as joint ventures (JVs) with non-Chinese OEMs like SAIC Volkswagen (with Volkswagen AG) and SAIC GM (with General Motors). Other group members include SAIC GM Wuling, which builds Wuling- and Baojun-brand vehicles; and SAIC Motor Passenger Vehicle, which builds MG- and Roewe-brand vehicles. This report focuses on the brand operations of SAIC's Chinese passenger-car brands.
The SAIC Group sold 5.86 million units in 2015, which is a 5.0% year-over-year (y/y) increase. It is projected that the Group will aim for sales between 6.4 and 6.5 million units in 2016. While SAIC VW's and SAIC GM's unit sales have been decreasing, those of SAIC's own independent brand vehicles have been growing, with a 12% y/y increase to 1.98 million units in 2015.
Baojun's 730 MPV and 560 SUV were both big hits with consumers. Their sales increased 2.8 times y/y to 500,000 units in 2015. Sales of MG's SUV, the MG GS, have also been robust, increasing 31.1% y/y to 72,000 units.
As a result of fierce competition from non-Chinese brands, SAIC's strategy for its own brands is to differentiate them, by launching SUVs and MPVs, which have proven to be popular in the Chinese market and introducing new powertrains.
Moreover, investments in new-energy vehicles (NEVs), which have seen increasing sales in China, are to be expanded. SAIC announced plans to invest CNY 20.0 billion invest by 2020 and have annual sales of Chinese brand new-energy vehicles (NEVs) to 200,000 units.
SAIC is also expanding overseas, and is planning to build plants in Indonesia and Thailand. It plans to develop and launch models jointly with GM, which will be sold not only in China, but also in Brazil, India, and Mexico.
SAIC Group affiliated passenger-car brands
|SAIC-GM-Wuling||A JV between SAIC, GM and Liuzhou Wuling Motors Co Limited that builds Wuling and Baojun passenger cars, and some commercial vehicles. It mainly builds low-cost MPVs and micro vans.|
|SAIC Motor Passenger Vehicle||Builds Roewe and MG vehicles. It mainly sells sedans and competes with non-Chinese brands.|
|SAIC Maxus Automotive Co., Ltd.||Builds MPVs for the Maxus brand, and small buses. Formerly SAIC Motor Commercial Vehicle|
|SAIC GM||JV with GM|
|SAIC VW||JV with VW|
SAIC Group's unit sales (wholesale base)
(Provided by MarkLines Data Center)
SAIC-GM-Wuling's Wuling / Baojun brand: Baojun MPVs and SUVs record strong sales
SAIC-GM-Wuling (SGMW) is a JV between SAIC, the majority shareholder (50.1%), GM (44% stake), and Liuzhou Wuling Motors Co Limited (5.9% stake). SGMW builds and sells Wuling and Baojun passenger-car vehicles and micro commercial-vehicles. It is particularly strong in the MPV market. Its 3 MPV models have a 47.5% share of the domestic MPV market to lead all other manufacturers.
In 2015, sales of Wuling-brand vehicles fell by 7.8% y/y to 1.29 million units. This was a result of consumers hesitating to buy before the launch of the fully redesigned Wuling Hongguang MPV, the company's leading model, and a shrinking market for micro commercial vehicles. Going forward, the company will strengthen its product lineup and aim for expanded sales, with a focus on brand strengthening and market penetration.
At the same time, while the Baojun-brand vehicles was limited to sedans and hatchbacks only, it has expanded into new segments with the 2014 launch of the Baojun 730 MPV, and the 2015 launch of the Baojun 560 SUV. The results of this was growth 2.8 times that of the previous year to 503,000 units. It has been reported that the company will launch a small electric vehicle (EV) in 2016.
New Chongqing production plant begins operations, with plans for doubling capacity in 2017
|Operation of new plant in Chongqing starts||In December 2014, SAIC GM Wuling completed the first stage of construction on a new production plant in Chongqing (the Chongqing Branch) and began operating it. The plant, which is located in Liangjiang New Area Industrial Development Zone, will build the Wuling Sunshine, a micro van. The company invested CNY 6.6 billion in the plant, which has an annual production capacity of 400,000 vehicles and 400,000 engines.|
|Starting the second stage of construction||The second stage of construction started. Once it is finished, the annual assembled car production capacity will double to 800,000 units. The company will invest CNY 7.5 billion in the project, and operations are scheduled to start in 2017. Moreover, the company plans to invest an additional CNY 10 billion to increase the annual powertrain production capacity.|
New Wuling models
|Wuling Sunshine S (Courtesy of SAIC)||Wuling Hongguang S1 (Courtesy of SAIC)|
|Wuling Hongguang S1||MPV||A new model, launched in August 2015. It is an MPV version of the third-generation Wuling Hongguang. It is priced between CNY 68,000 and 69,800. It is equipped with a P-TEC 1.5L DVVT engine that has a maximum output of 82kW and a maximum torque of 147Mn. It has a fuel efficiency of 6.6L/100km.|
|Wuling Zhengcheng||MPV||This model was launched in December 2014, and is targeted for business uses like commuting, business trips, and transporting goods. It has a maximum luggage space of 6,000L and can carry loads up to 1,000kg. The 7-seater version is priced between CNY 66,000 and 77,000, and the 9-seater is priced between CNY 66,200 and 77,200. It is built at a plant in Liuzhou City, Guangxi Zhuang Autonomous Region.|
|Wuling Hongguang V||Micro van||SAIC GM Wuling launched this new-model micro van in January 2015. It comes in six versions that are priced between CNY 42,800 and 51,800. The 5-speed manual transmission (MT) is mated to either a P-TEC 1.2L VVT engine or P-TEC 1.5L DVVT. The 1.2L engine has a fuel efficiency of 6.6L/100km.|
|Wuling Sunshine S||Micro van||Launched in June 2015, the Wuling Sunshine S is a higher-grade Wuling Sunshine and comes in two versions. It is priced between CNY 32,300 and 34,900. A 5-speed MT is mated to a redesigned 1.2L engine. It has a fuel efficiency of 5.9L/100km.|
Baojun brand: Annual production capacity increased to 1 million units through launch of new plant
|In August 2015, SGMW announced that a new Baojun brand vehicle assembly plant started operations. The company has set up a Baojun production base in Liuzhou, Guangxi, and has proceeded with total investments of CNY 8.0 billion in a second stage project. One part of this will be the second stage of plant construction. Once that is finished, the company says that it will have a production capacity of 400,000 assembled vehicles, 400,000 engines, and 200,000 new-energy vehicles (construction started in August 2015). In the future, together with the production capacity of 400,000 vehicles built in the first stage of construction, the plant will have a total capacity of 1 million vehicles.|
New Baojun brand models
|Baojun 330 (Courtesy of SAIC)||Baojun 560 at Shanghai Motor Show|
|Baojun 730||MPV||The company launched the new Baojun 730 MPV in July 2014. It sold 321,000 units in 2015, which underpinned the rapid advance of the Baojun brand. It is either a 1.5L or 1.8L engine. The 1.5L engine was developed for small cars by GM's European technical center. It has a fuel efficiency of 7.1L/100km.|
|Baojun 610||Hatchback||The 5-seater Baojun 610 was launched in April 2014. It comes in four versions priced between CNY 65,800 and 85,800. The powertrain is equipped with GM's P-TEC 1.5L DVVT engine, and either a 5-speed manual transmission or a 6-speed automatic transmission (AT) with MT mode. It has a maximum output of 82kW and maximum torque of 146.5Nm.|
|Baojun 560||SUV||The Baojun 560, which was launched in July 2105, is the company's first family SUV. A total of 145,000 units were sold in just a little over six months. It comes in three versions priced between CNY 76,800 and 89,800. They are being sold through a national network made up of over 2,600 dealers.|
|Baojun 330||Sedan||The company launched its first small sedan, the Baojun 330, in December 2015. It comes equipped with a 1.5L engine and 5-speed MT, and has a maximum output of 109ps and maximum torque of 135Nm. It has a fuel efficiency of 6.3L/100km, and is priced between CNY 55,800 and 59,800.|
SAIC's Roewe and MG: Aiming for a turnaround by launching new brand strategies and SUV models
Sales of the Chinese brands Roewe and MG, which are operated by SAIC, have continued to struggle. After reaching 230,000 units (a 15% y/y increase) in 2013 sales declined 21.8% to 180,000 units in 2014. In 2015 also, year round sales fell 5.6% to 170,000 units, in spite of a comeback that was helped by the second half launches of the MG GS SUV and Roewe 360 compact sedan.
The price war with non-Chinese OEMs that compete against these two brands has intensified, and SAIC's analysis is that weak brand strength is a contributing factor to the slump. The company is responding with plans to optimize the positioning of the brands and differentiate their products through measures such as introducing new powertrain series.
Strategy for optimizing the Roewe and MG brands
|Marketing strategy||* Creating new brand slogans: Roewe- "Sense: knowing you and the road", MG- "Charm in full bloom". * Developing an MG flagship model: A mid-sized SUV, the MG GS, was launched in March 2015|
|Product development||* New-type A platform: Developing next-generation models and a new-generation Roewe SUV based on the A platform. * Cube Tech (new powertrain series): A series of powertrains comprised of core components such as a direct injection engine jointly developed with GM, 7-speed DCT, start-stop system, and other features. It was first adopted for the MG GT, which was launched at the end of 2014. The SGE small-engine series covers the 1.0L-1.5L segment, while the MGE engine series covers the 1.8L-2.0L segment. * Developing NEVs: Securing core technologies such as motors, auxiliary batteries, and electronic-control technology. * Advancing R&D for connected cars.|
|Sales network||* Expanding the number of dealers throughout China. The company plans to have 100% coverage in Class 1 and 2 cities, 90% in Class 3 cities, and 30% in Class 4 cities (established in April 2015).|
New MG brand models: Launching SUVs
|MG 3SW (Courtesy of SAIC)||MG GS (Courtesy of SAIC)|
|MG GS||In March 2015, SAIC Motor Passenger Vehicle launched the new MG GS SUV, under the MG brand. This model comes in seven versions and is priced between CNY 109,000-179,700. In addition to being equipped with a "Cube Tech" powertrain that features a 1.5TGi engine and TST 7-speed DCT, the MG GS is a fully loaded, high-performance, mid-class SUV that is setting a new benchmark in its class.|
|MG 3SW||The new MG 3SW, a small-size SUV, was launched in October 2015. It features a 1.5L VTi engine and a 5-speed e-Shift. It is priced at CNY 87,700, and was developed for younger consumers, who seek individuality, off-road capability, and environmental performance. Based on the current MG3, its exterior design had cool British styling and its interior adopts a two-tone theme.|
New Roewe brand models: launching a 360 compact sedan and PHV
|The new Roewe 360 (Courtesy of SAIC)||Roewe E950 (Courtesy of SAIC)|
|Roewe 360||At the 2015 Chengdu Motor Show in September 2015, SAIC announced the launch the Roewe 360, a new compact sedan featuring a "Cube Tech" powertrain that comes with a 1.4TGI engine and TST 7-speed DCT. The 360, which will be priced between CNY 75,900-129,900, has been designed for a new class of families comprised by the "85 generation," (consumers born between 1985 and 1989). It has a long wheelbase (2,660mm) that provides a very spacious interior, and 25 storage spaces. Its luggage compartment is 482L.|
|Roewe E950||At the Guangzhou Motor Show in November 2015, SAIC announced the Roewe E950 PHV, a plugin hybrid version of the mid-end Roewe 950 sedan, It features an SGE 1.4L direct injection engine (maximum output 150ps/maximum torque 235Nm) and a ternary lithium-ion battery (11.8kWh). It has a fuel efficiency of 1.7L/100km, and accelerates from 0-100km/h in 8.5 seconds. It has a range of 600km in HV mode, and 60km in EV mode.|
R&D strategy: developing new-energy vehicles and connected cars
The following three areas are the main focus of R&D activities group-wide: 1) energy saving and power sources based on new-energy, 2) weight reduction technology, 3) connected cars and car electronics. There has been a particular commitment to environmentally friendly cars since 2015, and the structural transformation of technology and functional enhancement are proceeding in accordance with the growth of the Chinese NEV market.
At the 2015 Shanghai Motor Show the company announced its "Core Motion Strategy" for new powertrains, which aims to reduce fuel efficiency group-wide to an average of 5L/100km by 2020. In November 2015, it announced plans to invest more than CNY 20 billion in its NEV operations by 2020. SAIC plans to achieve whole year sales of 600,000 NEVs by the same year.
"Core Motion Strategy" for powertrains
|SAIC announced its Core Motion Strategy in April 2015, and formed two sub-brands; NetBlue (mass-market models) and NetGreen (eco-car models).|
|SAIC is aiming to make the average fuel efficiency of its companies an average of 5.0L/100km by 2020 through technological innovation. It plans to improve the efficiency of exhaust-gas emissions, power, and economy by 20% respectively from 2015 through 2020.|
|The company will improve electronic drive unit platform technology, and incorporate it into mass produced vehicles in the future. At the same time, development will be carried out on low-cost, hybrid technology, with the objective of using it in A class (C segment) models. The company already has the capability to apply its battery-control systems, battery-storage systems, and motor-control technology in assembled vehicles.|
Investing CNY 20 billion in NEV business
|In October 2015, the SAIC Group announced that it will invest over CNY 20 billion in its NEV business by 2020. * Over 30 NEV models will be launched by 2020, and the group plans to expand number of units sold per year to 600,000, with 200,000 of those being independent brand models. * The group is engaged with setting up an environment that promotes the NEV business by building 50,000 charging stations throughout China by 2020.|
|In November of the same year, the SAIC Group announced that it would make a private placement of new shares to raise a maximum of CNY 15.0 billion for businesses like NEVs. The details are as follows: * CNY 5.8 billion for R&D activities on independent brand eco-cars and new energy vehicles (including commercial vehicles) * CNY 1.4 billion to expand and improve production capacity of transmissions for NEVs. * CNY 7.8 billion for various projects like, fuel-cell vehicles (FCVs), autonomous-driving vehicles, connected cars, cloud development, e-commerce, and others.|
Connected cars: partnering with Alibaba for automotive IT development
|In July 2014 the SAIC Group signed a memorandum of intent to form a strategic partnership with the major e-commerce company Alibaba Group Holding Limited for in developing Internet-connected vehicles. This program will involve integrating various Alibaba technologies, like, the yun OS, big data, electronic communications, navigation systems, cloud computing, and music applications, into development of SAIC's assembled vehicles and parts. It has been pointed out that vehicles that merely function as means of transportation no longer fulfill the needs of consumers, and it seems that the company is aiming for expanded sales by launching "internet cars" that take advantage of IT technology.|
|In March 2015, both companies invested CNY 1 billion and set up an Internet-car fund. The first Internet-car model will be launched in 2016. SAIC has been independently developing its onboard inkaNet system, which was first released in the Roewe 550.|
Overseas strategy: establishing new production plants in Indonesia and Thailand; jointly developing new models with GM for emerging countries
There has been a continued decrease in the number of units exported by the SAIC Group since a peak of 107,000 in 2013 (12.2% y/y increase). Exports fell to 86,000 in 2014 for a 20.4% decrease, and 38,000 for the first half of 2015; a decrease of 9.0% over the same-period. The company stated that sluggish markets in export destinations such as the Middle East and South America were contributing factors for the decline.
In 2014, SAIC set up an international sales department to expand business outside of China. This has enabled the company to strengthen management functions for international operations at its headquarters, and integrate its overseas brand strategies. Moving forward, SAIC will accelerate a strategic shift to local CKD production and building factories overseas rather than exporting from China.
Construction is underway in Indonesia on a Wuling brand production plant with an annual output of 150,000 units, which is scheduled to go online in 2017. In Thailand, which is currently producing MG brand vehicles, plans to launch a second plant with an annual output of 200,000 units in 2018 are proceeding.
Indonesia: new SAIC GM Wuling production plant to go online in second half of 2017
|SAIC GM Wuling is constructing a new plant in Indonesia that will build Wuling brand vehicles. Construction started in August 2015 and the plant is scheduled to launch operations in July 2017. It will have an annual production capacity of 150,000 units, and the company invested USD 700 million in the project.|
|The new plant is located in the outskirts of Jakarta. It will mostly build vehicles for domestic sale, but the possibility is being considered of exporting to the ASEAN market in the future.|
Thailand: constructing a second plant with annual production capacity of 200,000 units
|Business policy in Thailand||SAIC has a joint venture with the Thai CP Group (Chia Tai Co.) that produces MG brand vehicles locally, and imports and sells Maxus mini buses. It is establishing the SAIC Group's overseas operating standards.|
|Thai plant||SAIC has been producing MG brand vehicles at its first plant in Thailand (Rayong Province) since 2014. While the plant has an annual production capacity of 50,000 units, its total production from January to November 2015 was around 4,500 vehicles. Moreover, in November 2015, the company acquired a 700,000m sq. plot of land in Chonburi Province for building a second plant. The company's plan is to invest between THB 30-40 billion until 2018 to build the second plant, which will have an annual production capacity of 200,000 units. SAIC was approved to participate in the Thai government's Phase 2 Eco-Car Program (see note below), and will invest THB 7.61 billion to build 110,000 vehicles.|
Note: under Thailand's Phase 2 Eco-car Program, OEMs that start production of government standard compliant eco-cars by 2019 will be eligible to receive favorable corporate-tax exemptions.
SAIC and GM invest USD 5 billion to develop new vehicles for emerging countries
|SAIC and GM's Chevrolet Division are jointly investing USD 5 billion to develop a new family of vehicles for emerging countries (announced in July 2015). The companies plan to significantly improve competitiveness and profitability by creating one new line of vehicles to replace a number of existing models. SAIC and Chevrolet expect that development costs will be reduced by jointly developing the core architecture and engines for the new line.|
|The new vehicles are to be produced and sold in Brazil, China, India and Mexico, and exported to other growth markets as well. A team of multi-national engineers and designers are developing the models, and they are being customized to meet the needs of each market. The companies are targeting overall annual sales of over 200,000 units for the new family of vehicles, and the initial new vehicles are expected to be 2019 year models. There are apparently no plans to launch sales of this series in any developed markets like as the US and Europe.|
(Note) In December 2015, there were reports in the Indian media that SAIC might buy GM's Halol Plant in Gujarat, India, which is to be closed in the second-half of 2016.
The production capacity of each SAIC plant
|SAIC-GM-Wuling||Liuzhou Hexi plant||*800||*800|
|Liuzhou Liudong plant(Baojun plant)||800 (Note)||1,000|
|SAIC Motor Passenger Vehicle||Lingang plant||225||225|
|SAIC MAXUS||Wuxi plant||*100||*200(2020)|
|SAIC GM||Jinqiao plant||320||320|
|Cadillac plant||160 (Operational in Jan. 2016)||160|
|Wuhan plant||240 (Operational in Jan. 2015)||480(2017)|
|SAIC Volkswagen||Anting plants (The first, second and third plants)||800||800|
|Nanjing plant(The fourth plant)||360||360|
|Yizheng plant(The fifth plant)||300||360|
|Ningbo plant(The sixth plant)||300||700|
|Urumqi plant(The seventh plant)||50||300|
|Changsha plant(The eighth plant)||300 (Operational in May 2015)||600|
|SAIC-Iveco Hongyan||Chongqing plant||*80||*100|
|Nanjing Iveco||Heimoying plant||*140||*78→*150 (after relocation)|
|Shanghai Sunwin Bus||Shanghai plant||Complete Vehicles*2.5||Complete Vehicles*2.5|
(Source: MarkLines Datacenter) (Note) Includes 400,000 units from second stage of construction (Capacity constructed in the second stage of construction was activated in August 2015, but the production capacity was unknown at that time. The production capacity is eventually planned to be 400,000 units.)
SAIC Group's (China) Production Volume
|Mini Van||Wuling Sunshine||289,982||217,992|
|Mini Van sub-total||611,899||602,416|
|Mini trucks (Chassis)||1,765||486|
|SAIC Motor Passenger Vehicle Nanjing plant||SUV||Roewe W5||10,081||4,362|
|SAIC Motor Passenger Vehicle Nanjing plant sub-total||129,241||87,476|
|SAIC Motor Passenger Vehicle Shanghai/Lingang plant||SUV||MG GS||0||46,160|
|SAIC Motor Passenger VehicleShanghai/Lingang plant sub-total||54,199||84,167|
|SAIC MAXUS (Shanghai Motor Commercial Vehicles))||MPV||Maxus G10||4,258||13,652|
|SAIC MAXUS sub-total||21,286||35,502|
|Shanghai Sunwin Bus||3,868||2,104|
(Source: MarkLines Datacenter)
Sales of domestic SAIC brands in China
|Mini Van||Wuling Sunshine||308,668||227,995|
|Mini Van sub-total||653,770||615,798|
(Source: MarkLines Datacenter)
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