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Fast expanding Guangzhou Auto still lacks clear competitive strategy
Guangzhou Automobile Industry Group Co. has been expanding fast and on many fronts. But the state-owned company has yet to state what it wants to be and how it plans to get there.
After running two profitable joint ventures with Honda Motor Co. and Toyota Motor Co. for years, Guangzhou Auto has this year taken quick steps to expand its presence on the domestic market.
In May it acquired Changfeng Motor Co., a small SUV maker in central China's Hunan province, and plans to lift the latter's annual capacity to 500,000 vehicles over the next few years from now around 100,000 vehicles.
In July, Guangzhou Auto inked a deal with Fiat S.p.A. to establish a 50-50 joint venture plant in Hunan and start building passenger vehicles in 2011.
The Guangdong carmaker is now in additional acquisition negotiations with Gonow Motor Co., a small pickup and minivan producer in east China's Zhejiang province.
And in a further expansionary move, Guangzhou Auto is also believed to have conducted takeover talks with two further, state-owned automakers; Shenyang Brilliance Jinbei Auto Co. and Southeast (Fujian) Motors Corp.
Judging by what it has done so far this year, one would categorize Guangzhou Auto chiefly as an investment company.
But the company also plans its own brand cars and is now building a plant in Guangzhou to make them, with an annual capacity of 100,000 units.
Its first own brand model is due out sometime in 2010. But with different concept models on display at domestic auto shows in the past two years, no clear direction is evident; neither in the technology it will pursue nor in the vehicle segment it will enter in the beginning.
Guangzhou Auto is cash rich. The company recorded 112.5 billion yuan ($16.5 billion) in revenue in 2008, making it the fourth largest auto company in China, next only to China FAW Group Co., Dongfeng Motor Corp. and Shanghai Automotive Industry Group Co. Its pre-tax profit last year reached 21.9 billion yuan ($3.2 billion).
Yet as the development of China's car industry has sadly shown, lots of easy money made from joint ventures with world-class foreign automakers is no indication that a domestic Chinese company can become a leading player on its own. Auto manufacturing is a capital-intensive business and the domestic market is highly competitive.
Unless Guangzhou Auto formulates a clear and focused strategy on what to do and how to compete, much of its financial resources will be wasted down the road.
After running two profitable joint ventures with Honda Motor Co. and Toyota Motor Co. for years, Guangzhou Auto has this year taken quick steps to expand its presence on the domestic market.
In May it acquired Changfeng Motor Co., a small SUV maker in central China's Hunan province, and plans to lift the latter's annual capacity to 500,000 vehicles over the next few years from now around 100,000 vehicles.
In July, Guangzhou Auto inked a deal with Fiat S.p.A. to establish a 50-50 joint venture plant in Hunan and start building passenger vehicles in 2011.
The Guangdong carmaker is now in additional acquisition negotiations with Gonow Motor Co., a small pickup and minivan producer in east China's Zhejiang province.
And in a further expansionary move, Guangzhou Auto is also believed to have conducted takeover talks with two further, state-owned automakers; Shenyang Brilliance Jinbei Auto Co. and Southeast (Fujian) Motors Corp.
Judging by what it has done so far this year, one would categorize Guangzhou Auto chiefly as an investment company.
But the company also plans its own brand cars and is now building a plant in Guangzhou to make them, with an annual capacity of 100,000 units.
Its first own brand model is due out sometime in 2010. But with different concept models on display at domestic auto shows in the past two years, no clear direction is evident; neither in the technology it will pursue nor in the vehicle segment it will enter in the beginning.
Guangzhou Auto is cash rich. The company recorded 112.5 billion yuan ($16.5 billion) in revenue in 2008, making it the fourth largest auto company in China, next only to China FAW Group Co., Dongfeng Motor Corp. and Shanghai Automotive Industry Group Co. Its pre-tax profit last year reached 21.9 billion yuan ($3.2 billion).
Yet as the development of China's car industry has sadly shown, lots of easy money made from joint ventures with world-class foreign automakers is no indication that a domestic Chinese company can become a leading player on its own. Auto manufacturing is a capital-intensive business and the domestic market is highly competitive.
Unless Guangzhou Auto formulates a clear and focused strategy on what to do and how to compete, much of its financial resources will be wasted down the road.
