Sichuan Tengzhong Heavy Industrial Machinery’s planned purchase of GM’s Hummer brand left market watchers at a loss in early June. Several analysts contacted by CHINA ECONOMIC REVIEW laughed when asked about the deal.
"It’s unknown. This is really unknown," said Yale Zhang, an analyst with CSM Worldwide.
The deal has yet to be completed and so details on issues such as pricing have yet to be released. But more remarkable than the deal itself is the lack of interest displayed in Hummer by China’s automakers. The answer may lie in branding: As a luxury SUV brand, Hummer does not fit into most firms’ product portfolios.
"The [auto] companies, they don’t need to focus on this kind of niche market," said Ricon Xia, an analyst with Daiwa Institute of Research in Hong Kong.
This doesn’t mean they have lost their appetite for overseas acquisitions, though. Most recently, Beijing Automotive Industry Corp was linked to GM’s Saab and Ford’s Volvo, having earlier failed to land Opel.
"[They] are very much into buying such international brands, as this will give them a shortcut to technology, but also a brand," said Klaus Paur of TNS China.
Geely has chosen a different route in its acquisitions. In late March, the company bought Drivetrain System International (DSI), an Australian transmission supplier, for US$40.6 million. Lawrence Ang, executive director of Geely Automobile Holdings, said the prize of the acquisition was DSI’s automatic transmission technology, an area where Geely lags behind competitors.
Industry experts warn that an appetite for purchases will not equate to their success; management integration and marketing remain real obstacles. Indeed, Xia believes Chinese firms would be best served staying local. "Even if the [foreign] assets look cheap, follow-up expenses will be a burden," he said.