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MG car line reborn with a made-in-China label

Nanjing Automobile using brand to expand

Workers add the final touches to a newly produced MG car at the Nanjing Automobile Group Corp. plant in Nanjing, China. Nanjing Automobile, which purchased the MG brand, is using it as a platform for global expansion. Workers add the final touches to a newly produced MG car at the Nanjing Automobile Group Corp. plant in Nanjing, China. Nanjing Automobile, which purchased the MG brand, is using it as a platform for global expansion. (Qilai Shen/Bloomberg News)

SHANGHAI -- Nanjing Automobile Group Corp. unveiled its made-in-China MG sports cars and sedans recently, the first step in a plan to use the iconic British brand as a platform for global expansion.

China's oldest automaker introduced the 1.8-liter MG TF roadster and its MG 7295 and MG 7275 sedans at its $450 million plant near the eastern city of Nanjing . The brand, renamed "Ming Jue" or "Modern Gentleman," will go on sale in China in the second half of the year.

Nanjing Auto, SAIC Motor Corp., and other automakers have added their own brands and begun targeting overseas sales, as increasing competition squeezes profit margins in the world's second-largest auto market. MG's new owner plans to invest $2 billion in the brand, including opening plants in the United Kingdom and United States.

"MG, as an established brand worldwide, will help Nanjing Auto attract customers' attention," said Huang Zherui, an analyst at CSM Asia, which advises carmakers in China.

The 7-Series sedans, with 1.8-liter and 2.5-liters engines, are "reachable classics" aimed at the mid-market, Nanjing Auto's president Yu Jianwei said . He declined to disclose the carmaker's production plans and retail prices. By comparison, the 2.4-liter Shanghai General Motors Co. Buick La Crosse sells from about $27,500.

MG Rover collapse
Companies in China, a country with more than $1 trillion in foreign reserves, have bought overseas rivals to gain brands and technologies that will help them expand overseas. Lenovo Group Ltd. paid $1.25 billion for International Business Machines Corp.'s PC unit in 2005. TCL Corp. bought German TV-maker Schneider Electronics AG in 2002.

Nanjing Auto bought the MG brand and other assets for $97 million in 2005 after the collapse of the U K -based MG Rover Group Ltd. SAIC Motor, a General Motors Corp. and Volkswagen AG partner, bought the design rights for two MG Rover models and for K-series engines for $130 million . The 2.5-liter Roewe 750, developed from the Rover 75, sells from about $30,300.

Nanjing Auto is building MG TF roadster convertibles at a former MG factory in Longbridge, England, and it also plans to open a research center there.

Oklahoma plant
MG TF Coupes will go into production in Ardmore, Okla., in May or June 2008, the automaker said . The roadster, a coupe, and a sedan will go on sale in the United States next year, Duke T. Hale, MG Motors North America Inc.'s chief executive, said .

"Japanese automakers took 30 years" to begin overseas sales, while "Korean automakers took 20 years," Wang Haoliang, Nanjing Auto's chairman said. "We are much faster."

The carmaker aims to sell as many as 60 percent of its MG cars overseas, Yu said without providing a timeframe. It is in talks with strategic overseas investors, he added, without elaboration.

The MG plant in Nanjing, built in under a year, has an annual capacity of 200,000 cars, 250,000 engines, and 100,000 gearboxes. It has internal roads called Birmingham Avenue and England Avenue, reflecting MG's U K roots.

The company is seeking up to $400 million in subsidies and loans to support its expansion plans, Yu said. It has won loans from the state-owned Export and Import Bank of China and from commercial lenders for its UK plant, he said. China's top planning agency has approved the factory, he said.

Nanjing Auto was founded in 1947, according to its website. Its main products are trucks and buses, as well as Fiat SpA Palio and Siena cars.

MG's heritage
The first ever MG car was built at Morris Garages in Oxford, England, in the 1920 s, according to the website chicagolandmgclub.com. The automaker built a series of two-seater sports cars including the T-Series and the MGB, an icon of the 1960s and 1970s.

The company was absorbed into British Motor Corp. in 1952, the start of a series of mergers in the U K car industry. The brand ended up as part of MG Rover, which collapsed in 2005 with debts of $2.7 billion .

China's economic growth has averaged about 10 percent for the past four years, making cars affordable to more people. Vehicle sales rose 25 percent last year to 7.22 million, as China surpassed Japan as the world's biggest auto market behind the United States.

Still, rising competition depressed Chinese automakers' profit margins to 3.1 percent last year from 9 percent in 2003, according to Bloomberg calculations based on numbers on the China Association of Automotive Manufacturers' website. Selling own-brand models means that a carmaker no longer needs to share its profits with an overseas partner.

SAIC Motor
SAIC Motor, China's largest automaker, sold about 4,000 Roewe 750s in China in about five months, president Chen Hong said in March. It aims to sell more than 200,000 passenger cars and 400,000 buses and trucks a year under its own brands by 2010.

The company has spent at least $600 million since 2002 buying overseas rivals and plants to develop brands independently of its partners, GM, and Volkswagen.

"We are seeing no obvious strains between the joint venture partners" and SAIC Motor, "but as their own products become bigger and more successful that will likely be an issue," said Gerwin Ho, a Hong Kong-based analyst at Bear Stearns Asia Ltd.

Geely Automobile Holdings Ltd., China's largest privately owned carmaker, is targeting sales of 240,000 Geely and Maple sedans this year, including 20,000 overseas. It has also agreed to buy a 23 percent stake in Manganese Bronze Holdings PLC, the largest maker of London black taxis, and to form a cab-making venture in Shanghai.

Chery Automobile Co., which has production partners in Iran, Malaysia, Bangladesh, and Argentina, plans to boost its sales 29 percent to 393,000 vehicles this year. Chrysler has also picked it to make cars for sale in the United States.

Up to 26 percent of the cars made in China last year were designed locally or modified from imported models, according to the automakers' association.

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