HONG KONG (Reuters) - Brilliance China Automotive Holdings Ltd, BMW's partner in the country, has signed a preliminary agreement with two U.S. billionaires aimed at beginning exports of low-cost sedans to the United States in 2009.
By Alison Leung
HONG KONG (Reuters) - Brilliance China Automotive Holdings Ltd, BMW's partner in the country, has signed a preliminary agreement with two U.S. billionaires aimed at beginning exports of low-cost sedans to the United States in 2009.
Brilliance, becoming the latest Chinese firm to unveil plans to enter the world's biggest auto market, has signed a distribution agreement with Rocket Capital Investment Group -- a vehicle of Houston Rockets owner Les Alexander -- and Red McCombs Automotive, executives said.
As part of the preliminary pact, Rocket Capital and magnate McCombs -- a founder of Clear Channel Communications <CCU.N> as well as Texas' largest auto dealership -- will pay about $100 million to buy 10 to 15 percent of Brilliance <BCAHY.PK>, Chairman Wu Xiaoan said on Monday.
!ADVERTISEMENT!Brilliance intends to join a coterie of ambitious Chinese players, including Geely Auto and Chery, keen on selling cheap vehicles in the United States and Europe, to escape fierce competition at home while establishing a global presence.
Analysts say car giants from General Motors <GM.N> to Toyota Motor Corp <7203.T> fear cheaper Chinese-made automobiles will flood the globe in coming years and grab market share.
But many Chinese firms have run into delays breaking into the highly competitive U.S. market because of perceptions of low quality.
"It's the world's largest market so Chinese automakers will certainly have to sell to the U.S. The process will be difficult but we've no fear. Everything's difficult in the beginning," Wu told reporters in Hong Kong.
For more details on the proposed alliance, please click on http://www.hkexnews.hk/listedco/listconews/sehk/20080310/LTN2008 0310117.pdf
Executives hope the Zhonghua, the firm's signature sedan and top-selling model, will spearhead its overseas drive.
Wu did not outline targets. But Brilliance has sketched out European ambitions previously: The firm hopes to capture 1 percent of the market, equivalent to its current entire annual sales, with an interim goal of selling 75,000 vehicles by 2010.
Wu said the firm expects to export 10,000 Zhonghuas this year, of which half will go to Europe, mainly to eastern Europe.
Brilliance's shares ended 2 percent higher on Monday, outperforming the market's 1 percent gain.
BRAND BUILDING
Brilliance, which makes BMWs with the German firm in China's northeastern city of Shenyang, is expected to reverse losses and report a net profit of 217 million yuan ($30.5 million) in 2007, according to six analysts polled by Reuters Estimates.
Rocket Capital executives said they and McCombs will also help Brilliance develop a Chinese business in after-sales support through a joint venture.
They hoped their experience with another Chinese icon -- all-star NBA Rockets' basketballer Yao Ming -- would stand them in good stead.
"Four years ago, we discovered Yao Ming and it was a huge success story," said Kenneth Huang, a Rocket Capital managing director and senior partner. "So we're confident that through the partnership, we can push Brilliance China to a new level."
While pushing overseas, the Chinese firm also plans to expand domestically.
Brilliance and BMW are building a second plant through their existing joint venture that will be completed by 2010 and able to produce 100,000 cars a year.
Their venture, which has capacity for 41,000 sedans, is expected to post a 20 percent volume sales rise in 2008, lower than the increase of more than 30 percent achieved in 2007, Wu said.
($1=7.110 Yuan)
(Writing by Edwin Chan; Editing by Jason Neely)
