28 June 2004

MG ROVER has announced a surprise tie-up with one of the biggest names in the Chinese motor industry. Britain’s last remaining volume manufacturer will develop a ‘strategic alliance’ with Shanghai Automotive Industry Corporation, a firm already involved in joint ventures with GM and VW.

The deal gives MG Rover a much-needed new partner to help fund the development of new models, especially the replacement for the 25 and 45, as well as to help gain access to the Asian markets. In return, SAIC gets access to the British firm’s technology. The Rover 45 replacement, previously planned only as a hatchback, will now have to be built in saloon form to appeal to the Chinese market.

The announcement raised eyebrows, not least because Chinese manufacturers are believed to be limited by law to two overseas partners. ‘It doesn’t sound like a normal joint venture,’ said Ashvin Chotai, Asian automotive research director for analyst Global Insight. ‘It’s a different business model from the joint ventures with GM and VW – SAIC will be contributing to the development costs. MG Rover is not in a powerful position because of its needs. Technology is the main thing it has to offer.’ The deal replaces last year’s stillborn agreement between MG Rover and China Brilliance, another of China’s biggest automotive players.

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