Chinese car manufacturers try to buy history

The main Chinese automotive groups (BYD, Geely, Chery, Changan, SAIC, and Great Wall Motors) have begun the conquest of the European market, despite the tariff war between the Asian giant and the European Union. The Chinese offer products packed with technology with a very competitive price-quality ratio that has attracted hundreds of thousands of European buyers over the last five years, coinciding with the massive arrival of vehicles – especially electric and plug-in hybrids – from China.

However, one of the major handicaps for Chinese brands in Europe is that the general public does not know them. Positioning a new brand in the market requires a sustained effort of commercial campaigns (advertisements and sponsorships), trust among consumers (reliability and good word-of-mouth among the general public), and a network of distributors and dealerships that open the commercial name of a product to the market.

The European automotive market is one of the most complicated segments in the world to do business in, as there is a strong rootedness of certain brands that we could call national or local with emotional and family ties. For example, some cars like the Seat 600 in Spain, the Fiat 500 in Italy, the Volkswagen Beetle in Germany or the Citroën 2CV in France are part of the collective imagination of their respective markets. The large Chinese car manufacturers have realized that they cannot compete with local manufacturers in terms of intangibles as relevant as history and rootedness, and for this reason the vast majority have decided to buy the historical legacy on which to build their commercial offer.

Volvo, Lotus, MG… and Ebro

The first automotive group to initiate this tactic of acquiring local brands was the Geely group, a private capital conglomerate that already acquired Volvo and Polestar years ago, and later took over a significant part of Smart and the entirety of Lotus. Geely has known how to maintain the design and production centers of Volvo and Polestar in Sweden and preserve the prestige of the brand, while it has leveraged the technologies and mechanics developed for Volvo, Lotus, and Polestar to replicate them in the other brands of the group such as Lynk & Co, Livan, or Zeekr, among others. Geely's leaders know that, despite being the same car, the European public is willing to pay much more money for a car with the Volvo logo than for one with the Lynk & Co or Livan logo, for example.

However, the Geely group also has some notable failures, such as the case of Lotus. Lotus is a small English manufacturer specialized in small, convertible, and two-seater cars (known as roadsters) which until now had kept alive the legacy of its founder, the legendary Colin Chapman. But since Geely acquired the brand, it decided to reorient Lotus towards the segment of large, heavy, and electric SUVs. The result has been a resounding failure: Lotus buyers know very well what they want, while the group's management has shown a worrying lack of knowledge (and even respect) for the legacy and history of the brand.

SAIC is a state-owned manufacturer (controlled by the Chinese government). In 2007, it bought the remains of the historic English brand MG (Morris Garages) to make it the spearhead of its strategy for penetration into the European market. MG formally maintains its headquarters on the outskirts of Birmingham, where it designs the products and carries out administrative tasks, but SAIC manufactures all its cars in China and then brings them to Europe.

In fact, SAIC is in advanced negotiations with the City Council of Ferrol and the Xunta de Galicia to establish an assembly plant (not a production one) at the facilities annexed to the port of Ferrol. SAIC's idea is to have the cars arrive in parts and assemble the pieces at the Galician plant, and then distribute the cars by sea Europeans already completed to other ports in France, Germany, the Netherlands and the United Kingdom.

This production process, called SKD (semi knocked down) is the same one chosen by the Chery Group for its European landing at the Zona Franca facilities in Barcelona. This plant, called Ebro Factory, receives the cars from the resurrected Ebro –which does not claim to be the continuation of the original brand– already manufactured in China, and it limits itself to assembling the parts. Ebro's roadmap consists of relying increasingly on local suppliers that allow for the reduction of the tariffs that each assembled unit must face, and of using the paint and body shops that the factory has at its facilities.

The success of Ebro has encouraged other investment groups to seek alliances with Chinese manufacturers or intermediaries to resurrect other historical brands, such as the case of the Andalusian Santana, based in Linares (Jaén). To this trend, we must add the purchase of the multinational tire company Pirelli by the Chinese company ChemChina in 2015, while they reach agreements with local manufacturers, their main rivals, to gain control of their factories, as in the case of the Ford plant in Almussafes, where the Geely Group will manufacture, or the Aragonese plant of Figueruelas, which will also manufacture Leapmotor models.

And now, Maserati

At this point we can state that buying local brands with history, legacy, and prestige is one of the preferred entry points for Chinese manufacturers. In this sense, for several months, even years, there have been rumors about the possible sale of the Italian brand Maserati to a Chinese manufacturer, in this case Huawei and JAC. The Chinese know that no luxury brand created in China will ever be able to aspire to the prestige, distinction, and luxury that the Maserati brand has, while the Stellantis group needs to raise cash to face necessary investments for its star brands like Peugeot, Jeep, or Fiat, to deal, precisely, with the Chinese competition.