Saab failure another dent in China's auto dreams

China's automakers may dominate their home market, now the world's largest, but the collapse of the sale of Saab to a Chinese-backed group shows it will be a bumpy ride for them to build a global profile.

Beijing Automotive Industry Holding Corp (BAIC) ranks 10th among China's automakers, who are looking for a short cut to the global market by snapping up assets from distressed Western giants such as General Motors.

The Chinese generally churn out low-end cars for the booming domestic market and lack the technology and management and marketing expertise to handle global brands.

At this week's Guangzhou Autoshow in southern China, many of these homegrown car makers boasted of record sales this year and more growth next year, but these mainly young manufacturers are not yet ready to take on seasoned global giants such as Toyota Motor, GM and Volkswagen.

"Their products are focused on the low-end market and cannot meet requirements of the western world, such as Europe," said Zhang Jing, an analyst at Phillip Securities. "They can't even get an entrance permit and there's still a long way to go."

Reflecting the difficulties the Chinese face, the BAIC-backed consortium said on Tuesday it was dropping its Saab bid, throwing that venerable brand's future into doubt and leaving the Chinese automaker to weigh its next move.

The next test case will be Sichuan Tengzhong Heavy Industrial Machinery, a little-known machinery maker, which agreed to buy the gas-guzzling Hummer marque from GM. It hopes to close the deal by late this year or in early 2010.

Zhejiang Geely Holding, parent of Hong Kong-listed Geely Automobile, is bidding for Ford's loss-making Volvo cars unit.

While most of China's automakers have focused solely on the home market, some have begun exporting to developing countries in Africa, the Middle East and South America.

Now, the global financial crisis is providing them with a possible short cut to the world market, where well-known brands such as Volvo, Opel, Saab and Hummer are up for grabs as part of a major global restructuring.

BAIC initially wanted to gain access to Saab's vehicle technology via the indirect link of taking a stake in small Swedish luxury car maker Koenigsegg, which bid for the Swedish brand. BAIC would then help revive Saab by increasing its vehicle sales in China.

Analysts say the Chinese firm may still bid for some Saab assets, but was unlikely to go solo on bidding for the company.

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