Nanjing Automobile Group is set to become the first Chinese company to make cars in the United States.
In a move that has drawn scepticism and mockery from commentators, the Jiangsu Province automaker said in a US press release on Wednesday that it will start building cars under its acquired British brand, MG, at a plant in Oklahoma in 2008.
The US plant will produce a redesigned MG TF coupe. It will be the brand's third manufacturing site, joining bases in Longbridge, England, and Nanjing.
Analysts have been left dumbfounded by the flagging automakers announcement.
Yale Zhang, a Shanghai-based manager of US auto consultancy CSM Worldwide Corp, yesterday told China Daily: "It's astonishing.
"I can't understand why Nanjing Automobile has decided to build a new plant in the US for MG, a small-volume brand, since it has already has two factories."
He suggested the Chinese company should first try producing MGs in England and Nanjing.
Officials from Nanjing Automobile could not be contacted yesterday.
The factory in England, which closed in 2005 when MG Rover Group collapsed, will reopen in 2007 to assemble the MG TF roadster.
Meanwhile the Nanjing plant will begin manufacturing the MG 75 sedan next year and two other MG models at a later date.
Last year Nanjing Automobile, owned by the local government in Jiangsu, spent 53 million British pounds (US$91.3 million) buying the MG brand, the Longbridge plant and Powertrain, MG Rover's engine arm.
Agreeing with Zhang, Jia Xinguang from the China Association of Automobile Manufacturers called Nanjing Automobile's plan to build a new MG plant in the US "a big mistake."
"It's not worth investing heavily in the US for MG, as there are only a small number of MG fans and competition is very tough," said Jia.
The cost of the planned Oklahoma plant and sales network has not been revealed. However combined capital investment in the three MG projects will be more than US$2 billion.
Li Chunbo, an auto industry analyst from Citic Securities Co Ltd in Beijing, said prospects for the US MG project were gloomy.
"Nanjing Automobile is gambling, but it has almost no chance of winning. MG failed in Britain and has not been successful in China, let alone in the US," said Li.
Nanjing Automobile is one of a few Chinese vehicle manufacturers aiming at the US market.
Chery Automobile, from Anhui Province, and Geely Automobile, from Zhejiang Province, are also expected to attempt forays into the world's biggest and most demanding car market with their own brands but so far they have no plans to produce there.
Zhang Xin from Guotai & Jun'an Securities Co Ltd in Beijing said Nanjing Automobile, which has been under financial strain for a long time, should pour its efforts into selling MGs at home and in England, instead of building a new plant in the US.
"However, the US project will at least give Nanjing Automobile a lot publicity," Zhang joked.
The company has been in the red for many years due to sluggish sales.
Last year, it lost more than 400 million yuan (US$50 million), according to securities firms.
In the first half of this year, Nanjing Automobile's sales tumbled by 8.63 per cent year-on-year to 54,963 vehicles, despite buoyant growth in the overall domestic car market.
Nanjing Automobile makes own-brand light-duty trucks and low-cost cars in Nanjing and Wuxi, another city in Jiangsu Province.
It also runs a joint venture in Nanjing with Italian carmaker Fiat Auto and partners Italy's Iveco to make larger vehicles in the city.
The company has total assets of 12 billion yuan (US$1.5 billion) and 14,600 employees.
(China Daily July 14, 2006)