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Hu Maoyuan relocated SAIC commercial vehicles
Shanghai Diesel recently announced that its controlling shareholder, Shanghai Electric Group Co., Ltd. (referred to as Shanghai Electric), is in discussions with SAIC Motor to transfer all of its shares in Shanghai Diesel Holding. The company is also engaging in communication and reporting with relevant authorities and departments. This move signals a potential shift in ownership structure and strategic direction.
Previously, Shanghai Electric had planned to sell 50.32% of its stake in Shanghai Diesel to SAIC Motor or its subsidiaries. The valuation would be based on net assets, while considering factors like return on equity (ROE) and price-to-earnings ratio. This approach aims to ensure a fair and transparent deal for both parties involved.
According to sources from the Shanghai Municipal Government, SAIC and Shanghai Electric are actively communicating with the State-owned Assets Supervision and Administration Commission (SASAC) and the China Securities Regulatory Commission (CSRC). They are currently conducting due diligence and audit evaluations. Under normal circumstances, a formal agreement is expected to be signed by the end of the year.
Shangchai, which has long been a key player in diesel engine manufacturing, is undergoing a major business transformation. Although SAIC and Shangchai have had contact for years, meaningful progress was only made recently. One of the main reasons behind this development is Shanghai Electric's decision to re-enter the A-share market, along with SAIC's broader strategy to expand its commercial vehicle business through component manufacturers and enhance production capacity.
Many truck companies, including China National Heavy Duty Truck Group, Shaanxi Heavy Duty Truck Group, and Futian Automobile, have their own supporting systems but have struggled in recent years. As a result, Shanghai Diesel faces challenges in securing strong customers in the automotive parts market. Currently, it produces around 60,000 to 70,000 marine engines annually, but only about 2,000 units for the auto sector—far below its competitors.
However, Shanghai Diesel plays a crucial role in SAIC’s efforts to build a comprehensive commercial vehicle system. Over the past few years, SAIC has seen rapid growth in the passenger car segment. Hu Maoyuan, a top executive, has emphasized the importance of developing a complete vehicle and parts system, especially in key components like powertrains, chassis, and electronics. These components are already listed under SAIC’s subsidiary companies.
This strategy extends to the commercial vehicle sector as well. According to Hu Maoyuan, key components are essential for future competitiveness. In commercial vehicles, the most critical parts are the chassis and engine. While SAIC’s commercial vehicle subsidiaries, such as Shanghai Huizhong and Chongqing Hongyan, have strong chassis systems, the group lacks a robust engine division. Although Nanjing Automobile has an engine business, it mainly serves existing commercial vehicles and lacks heavy truck capabilities.
After acquiring Shanghai Diesel, SAIC expects to significantly increase its production of vehicle diesel engines, surpassing marine engine output. A SAIC spokesperson stated that the integration of Shanghai Diesel would help turn its performance around and boost the group’s self-sufficiency in components, benefiting both parties in the long run.
SAIC has set ambitious targets for its commercial vehicle division. With the passenger car market becoming more competitive, the company is focusing on expanding its commercial vehicle operations. “We must achieve the first place in commercial vehicles just as we did in passenger cars,†said a senior SAIC official.
Under Hu Maoyuan’s plan, Shanghai Huizhong aims to produce 50,000 commercial vehicles by 2008. Meanwhile, Shanghai Shenwo is investing heavily in new energy buses to capture a larger market share. By 2010, SAIC hopes to reach 700,000 units in production and sales, positioning itself as a global automotive leader.
Currently, SAIC is the largest automotive company in China, but its commercial vehicle division lags behind FAW and Dongfeng. To close this gap, SAIC is focusing on building a complete system and increasing investment in commercial vehicles. A mid-level SAIC executive noted that while passenger car profitability remains strong, the commercial vehicle segment is now receiving more attention and resources.
In June 2005, SAIC President Chen Hong highlighted the alignment of commercial vehicles with macroeconomic trends and infrastructure development, presenting new opportunities for growth. He also emphasized that commercial and passenger vehicles operate on different cycles, offering a balance to the group’s overall economic interests.
Recently, SAIC and IVECO signed an agreement with Chongqing CNHTC to establish a joint commercial vehicle company, acquiring 67% of Hongyan Auto’s shares. Sinotruk will hold the remaining 33%, and together they aim to build a 40,000-unit annual production capacity. Chongqing Hongyan, known for its high-end trucks, will provide SAIC with a base for medium and high-end heavy truck production.
Following this partnership, SAIC will also gain access to Iveco’s technology and brand, allowing them to sell some Iveco models in China. Additionally, a new engine company will be established in northern Chongqing to design, manufacture, and sell commercial vehicle engines.
Although SAIC now has a heavy truck business, it lacks scale and profitability. This is one of the reasons why SAIC recently signed a cooperation agreement with Nanjing Auto. Nanjing Iveco, a joint venture between Iveco and Yuejin Group, produces a wide range of trucks and buses, further strengthening SAIC’s commercial vehicle portfolio.
With Chongqing Hongyan, Nanjing Iveco, and SAIC’s existing bus brands, the group is building a nearly complete commercial vehicle product line. SAIC estimates that after these acquisitions, its commercial vehicle production and sales could reach 130,000–140,000 units annually, still far behind FAW’s 170,000-unit capacity.
To further strengthen its position, SAIC announced in June 2007 that it would invest 210 million yuan over five years to establish a commercial vehicle technology center. This move underscores its long-term commitment to the commercial vehicle sector.
**Related Topics: SAIC Commercial Vehicle Expansion**