Three Auto Giants Compete for JV Program

　　Subaru has enough reasons to attract Chinese automobile manufacturers. However, which automaker will become the lucky one?

　　What about Beijing Automotive Industries Company and Power Diversity Automobile Trade Co., LTD.? According to the news revealed by media, regarding this joint venture program, Subaru will hold 50% shares and Beijing Automotive Industries Company and Power Diversity Automobile Trade Co., LTD. will have 25% shares respectively. The headquarters of the joint venture and the manufacturing plant will be located in Beijing. In the first stage the joint venture will produce 50,000 sport utility vehicles. Then Subaru sedans will be produced. The joint-venture base of auto parts will be located in the city of Tangshan, in which the headquarters of Power Diversity is situated.

　　There are several advantages as to this combination. First of all, Power Diversity, the largest dealers of Subaru in China, will offer supports. At the same time, BAIC has experience in producing SUV. Moreover, Beijing, the capital of China, has unique geographical advantages. Power Diversity has a strong interest in the domestic production of Subaru vehicles. On the one hand, the company has plans to have access to automobile manufacturing. On the other hand, as the largest dealer of Subaru, Power Diversity has to gain a positive position in the joint venture or else its status may not be preserved in the sales system of Subaru in the future.

　　However, there are also some disadvantages. The investment and management capacity of BAIC are not that satisfactory. Recently BAIC are engaged in some major projects. Therefore the budget is rather tight. All of those disadvantages are obvious, which have been reflected in some cooperation programs to certain extent. Finally, some projects resulted in stagnation or failure, such as the restructuring of Fujian Daimler.

　　According to some sources, in fact Subaru believed that BAIC only ranked the third among all the bidders. Without the participation of Power Diversity, the chance will be quite slim for BAIC.

　　Therefore, what are the advantages of cooperation between FAW and Subaru? Toyota holds a stake in Fuji Heavy Industries to which Subaru belongs. Till now FAW has established close relationship with Toyota. With the supports from government, FAW may obtain approval more easily when applying for founding a new joint venture. Moreover, FAW has abundant experience in running high-end models.

　　However, there is also a disadvantage. There is a giant gap between the powers of FAW and Subaru. FAW may hold a much stronger position in the joint venture.

　　So what about Shanghai Automotive Industry Corporation? According to the information revealed by media, SAIC insisted on holding 51% shares during the negotiations. However, Subaru refused to accept such a condition. Finally, as to the proportion of shares, SAIC made concessions. Such an incident reflected that for Subaru there is a disadvantage regarding cooperating with a giant like FAW and SAIC. SAIC may hold a stronger position in the joint venture.

　　There are also advantages for the cooperation between Subaru and SAIC. Just like the situation of Power Diversity, Shanghai Anji Subaru is a dealer of Subaru in China, which is the subsidiary of SAIC and wholly owned by the giant automaker. In order to enhance the position and function in the sales system of Subaru, it is necessary for SAIC to win the bid of domestic production of Subaru. In addition, SAIC has abundant funds as well as outstanding ability of investment and management. According to Sohu Auto, besides SAIC, FAW and BAIC, Chery, JAC are also interested in the program of domestic production of Subaru. On the one hand, those automakers hope to get more profits by establishing a joint venture. On the other hand, the local government also has the enthusiasm. (Translator: Qinghua/Hanxin)

　　See Original Chinese Report Please Clicks:

　　http://auto.sohu.com/20100728/n273813998.shtml