Rising dragon? How SAIC could emerge as a global powerhouse

When it comes to hidden potential, few can hold a candle to the sheer amounts of it wielded by the Chinese automotive industry. Once a purely domestic curiosity, some of the country’s biggest automakers are now seeking to rapidly expand their presence, and perhaps be able to market their wares in other markets including the U.S. However, are some of these Chinese firms ready to make the proper investments and moves needed to transform into global players? Or are these hurdles still too much of a challenge for them to overcome? We take a deep dive and try to discover if SAIC Motor could make the leap into this new frontier.

One of the first things that you will notice about China’s automobile landscape is that it’s a woven tapestry of companies and models. While alot of these firms are nowhere near ready to make the big step towards global expansion (for various reasons) There are a number of bigger firms that do have the potential to perhaps make this step. For the sake of simplicity, we will focus on SAIC Motor which is one of the members of the ‘Chinese Big Four” with the other three being Donfeng, FAW, and Chang’an. SAIC Motor is arguably the biggest of the four, and the state owned firm also had the highest production volume of models in the country, with the company producing over 4.5 million models back in 2015. SAIC also has a bit of heritage on its side, with the firm currently owning the historic MG brand which was once an iconic manufacturer of British automobiles.

So why does SAIC seem like to be the most logical candidate to bring Chinese vehicles to the international market? It all comes down to two key reasons in our view. The first is because of the large number of joint ventures that the firm has with foreign automakers including Volkswagen, Buick, and Chevrolet. These joint ventures are common, and are required conditions for foreign automakers under Chinese law. It would not be too much of a surprise if SAIC is learning key basics from some of these foreign partners, and could perhaps put some of that acquired knowledge into production models. That could include better green technology, as well as infotainment improvements.

As for the other reason why SAIC could be the firm to successfully venture into the broader global market is because of its range of van models under the Maxus banner. These van models are very popular in the commercial segment, and treading the waters in this segment would be a good first step for a company like SAIC. This move is not without precedent either, with Ford and Volkswagen confirming that the first fruits of their alliance would begin in the commercial vehicle sector, before gradually branching out to more traditional vehicle markets. Perhaps SAIC can use the commercial vehicle segment as an early barometer of how its products could be received by buyers. Then, they can use the information gathered to formulate their next move, especially one that involves branching into other vehicle segments.

However, it will be interesting to see how SAIC would be able to handle the immense amount of engineering that would be required to have their vehicles meet rigorous safety requirements in Europe and other markets. The U.S. market for the moment would not be considered due to the current political climate between the U.S. and China, but even in Europe, SAIC would be subject to strict fuel and safety regulations. As it is, none of their current models meet those requirements, but perhaps in the near future, SAIC could leverage its resources, and finally succeed in being a truly global player in the automotive world.