Shanghai Automotive Planning Aggressive Expansion to Compete Globally

SHANGHAI, China May 27,2005; The AP reported that Shanghai Automotive Industry Group Co., one of China's biggest automakers, plans to boost its total capacity to 1.1 million vehicles a year and build more engine plants in an ambitious effort to boost its global competitiveness.

The state-owned company, also known as SAIC, will expand its joint venture factories with Volkswagen AG and General Motors Corp., state-run newspapers reported Friday, citing company officials. Its current total capacity is 770,000 vehicles a year.

SAIC faces major challenges in its bid to become a global car company. It lacks any brands of its own -- making and selling only models of its joint venture partners. And sales for its biggest partner, VW, have plunged in recent months as growth in nationwide auto sales has slowed.

Undaunted, SAIC says it is also planning to build three new engine plants.

"We are working out a blueprint that will enable us to use resources across the country and improve our competence as we work to become competitive globally," the Shanghai Daily quoted SAIC President Hu Maoyuan as saying.

SAIC and VW are refitting a plant to build their latest model, the Touran multipurpose vehicle, and other new models, it said.

GM's joint venture with SAIC will soon open a new auto plant in Shanghai, raising annual capacity by 200,000 to 520,000.

For now, SAIC is focusing on cutting production costs, which have risen with soaring prices for steel and energy, by sourcing more components locally.

SAIC recently ended joint venture talks with ailing British automaker MG Rover that many in the industry viewed as a potential opportunity for the Chinese company to acquire expertise and a European manufacturing base.