Chinese-Made MG and Roewe to Avert Face-Off

SHANGHAI - August 28, 2007:

Nanjing Automobile (Group) Corp, which bought bankrupt British automaker MG Rover in 2005, announced the prices for its MG 7 series on August 23, despite the upcoming tie-up with SAIC, whose Roewe brand is also a carry-over of MG Rover.

Roewe 750

Roewe 750 (and a hybrid version) entered Chinse market at the end of January. Now MG will go on sale next month. According to an official announcement, a basic 1.8L turbo version of MG7 is priced at 171,600 Yuan ($22,578), a flagship 2.5L model with a V6 engine priced at 302,800 Yuan ($39,842).

MG 7

However, in contrast with Roewe prices which stand between 231,800 Yuan ($30,620) to 276,800 Yuan ($36,565), the MG prices which start from 171,600 Yuan are competitive. Could the two Chinese-made high-end car models avert a face-off?

As local newspaper Chongqing Business reported, after SAIC wholly controls Nanjing Auto in early next year, the two brands will be preserved and integrated into SAIC's business.

Top-level executives of the two sides met on August 22 and reached a consensus that MG brand vehicles, which are already world-known, will be exported; while Roewe is designed to cover the mid- to high-end domestic market.

SAIC's legal and financial advisers to NAC will finish the due diligence process by the end of August. SAIC then will open the company's books to Nanjing Auto for the due diligence process. The equity assessment from both partners will be completed by the end of September. A detailed merger agreement is expected to come out by October 1.

As the products and technology from the two companies overlap, a remaining question is how to share the auto parts and make full use of synergy.

In 2005, SAIC bought the intellectual property rights of two models, the Rover 25 and the Rover 75 as well as the Rover powertrain K series of engines. Nanjing Auto on the other hand got everything else. Nanjing Auto started a $362 million MG production line in the Nanjing while SAIC launched its own brand Roewe.

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