SHANGHAI -- Beijing Automotive Industry Holding Corp. (BAIC) has obviously learned from its domestic peer Shanghai Automotive Industry Corp. (SAIC) in its decision to buy only assets from Swedish carmaker Saab, instead of the Saab brand itself.
Now, after taking home all the rights to the current Saab 9-5 as well as some technologies from the Saab 9-3, there is another thing BAIC should learn from SAIC.
That is: how to build its own brand.
In negotiations over the winding down of MG Rover in 2005, SAIC ended up buying two platforms, the Rover 25 and the Rover 75, along with some engine technologies from the British carmaker. That was a smart move, especially when you compare it the rash choice of its competitor, Nanjing Automobile Group, to acquire the MG brand.
Nanjing Auto paid the hefty price of more than 50 million pounds ($80 million) for the MG brand in the same year. It then discovered marketing the weak British brand in China was too costly. Unable to survive on its own under the financial burden resulting from its purchase, Nanjing Auto was acquired by SAIC in 2007.
So SAIC has served as a role model for BAIC in its negotiations with Saab. As with SAIC and MG Rover, BAIC avoided buying the whole of Saab, which is also a weak brand in the eyes of Chinese car consumers.
Now BAIC has finally acquired technologies with which it will be able to develop models carrying its own brand. If everything goes smoothly, BAIC will quickly build a model on the platform of the Saab 9-5 and display it at next year's Beijing auto show.
Beyond this, it needs to know that while building new models is one thing, building a brand is another.
To date, BAIC has to a great degree been an investment holding company. It runs joint ventures with Hyundai Motor Co. and Daimler AG. It also owns a controlling stake in a light commercial vehicle manufacturer Beiqi Foton Motor Co.
Yet the Beijing company has little experience of building a brand. Once again, therefore, it would do well to look to its southern cousin.
Since acquiring two platforms from MG Rover in 2005, SAIC has launched two models under its own Roewe brand -- the 750 and the 550.
SAIC is different from other domestic carmakers because it does not want its own brand cars to compete on price. Even the smaller model, the Roewe 550 compact sedan, has a starting price of 127,000 yuan ($18,594).
Instead, SAIC has tried to differentiate itself through its services and quality. Such a strategy has paid off nicely for the Shanghai company.
In J.D. Power's 2009 China Customer Service Index Study, Roewe ranks fourth highest in customer satisfaction with authorized dealer after-sales service. That puts it behind only Guangzhou Honda, Lexus and Mercedes-Benz.
Chinese consumers have reacted positively. After hitting the market in May last year, sales of the The Roewe 550 exceeded 59,000 units in the first 11 months of 2009, according to Automotive Resources Asia, a J.D. Power unit. That was an impressive volume for a new brand.
The moral to be followed is that success for SAIC came after huge and sustained investments in product quality and customer services.
BAIC did well to learn from SAIC in the smart deal it cut with Saab earlier this month. If it wants to go further and build a strong brand, it should take a second leaf from the book of its southern cousin.