2 May 2005

Shanghai Automotive has confirmed that it has written to several former MG Rover component suppliers to investigate securing a parts supply that would enable it to manufacture the Rover 75 – and possibly the 25 and K-series engine – in China. It owns the intellectual property rights to all three, but is currently investigating how it might begin manufacture of the cars, a task considerably harder now that MG Rover has gone into administration. Shanghai is also understood to be in contact with PricewaterhouseCoopers, MG Rover’s administrators, over the purchase of the Longbridge production lines. The company faces a number of major challenges to restarting production in China, including the construction of a factory, the installation of the lines without the help of MG Rover, setting up supply of the K-series engine – either by sourcing it from the UK or moving the machinery to China – and establishing a components supply. Meanwhile, MG Rover engineers familiar with the production line are being rehired elsewhere. SAIC may a face selling cars that could attract significant import duties, because they do not contain sufficient local content. Cars sold in China need to contain 40 to 60 per cent local content to avoid attracting duty. SAIC will also have to negotiate with BMW for use of the Rover name, which BMW would only have automatically sanctioned had a joint venture been formed with MG Rover. A SAIC spokeswoman has also said that the company is not planning to develop relationships with any other overseas companies in the wake of the failed MG Rover venture.

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