Why are Youngman so keen on Saab?

Last week autonewschina.com featured an interesting piece written by their managing editor, Yang Jian. It gives a few insights how Saab is seen from a Chinese view. It also indicates that Youngman’s interest in Saab in not that fresh, they already looked at the brand for quite a while.

Why are the Chinese so keen to acquire Saab?
Yang Jian | 2011/12/16

SHANGHAI — Once again, liquidation looms for Saab Automobile AB as a Swedish court decides whether to end the company’s credit protection.

And once again a Chinese suitor — this time Zhejiang Youngman Lotus Automobile Co. — is trying to save the brand.

This week, Youngman wired $5 million (32 million yuan) to pay Saab’s immediate tax expenses. Earlier this year, Pang Da Automobile Trade Co. paid 401 million yuan to buy a fleet of Saab vehicles.

But why are these companies so keen to acquire the deeply troubled Swedish brand? The answer is that Pang Da and Youngman understand the value of a global brand.

Supported by cheap labor, Chinese companies can make products at very low cost, but they are still weak at brand-building.

Weak brands are especially problematic for domestic Chinese automakers because nearly all the global automakers have entered China.

As president of China’s largest auto dealer group, Pang Da President Pang Qinghua knows the importance of a strong brand.

Pang Da sells imported Subarus in China. Pang Qinghua knows that even a second-tier global brand such as Subaru commands more respect among Chinese consumers than a domestic brand.

That’s why Saab attracts him, and that’s why he wants to buy it. “As a brand that has been around from 1947, Saab has a rich cultural heritage and many unique attributes,” he told reporters during an industry forum in October.

Youngman — originally a bus manufacturer — likewise is dying to acquire a strong brand.

In 2006, the same year that Youngman began producing cars — company President Pang Qingnian cast his eye on Saab. In 2009, he contacted Saab to express his wish to invest, only to be turned down.

“Saab is a global brand and China is a large market,” Pang Qingnian told journalists after signing the acquisition deal with Saab last month. “It is pretty sure that we’ll use it to explore the Chinese market.”

China’s government also has learned to appreciate a strong brand.

In 2010, Beijing overruled Sichuan Tengzhong Heavy Industrial Machinery’s bid for General Motors’ Hummer brand. But a year later, the government happily blessed the Saab deal.

Behind its attitude change is the government’s recognition that the Chinese automakers must build their brands.

Because of their poor images, domestic brands are losing market share in China to global rivals such as Volkswagen and GM. Moreover, they are years away from competing successfully in Europe and the United States.

Zhejiang Geely Holding Group Co.’s acquisition of Volvo has shown that a Chinese automaker can manage a foreign brand. Now the government believes that other domestic automakers might profit from Geely’s example.

But Chinese automakers must move quickly. As global automakers recover from the recession, they have become increasingly protective of their technology.

Opportunities to scoop up a distressed global brand are quickly vanishing. This explains why Pang Da and Youngman are making a last-ditch effort to rescue Saab.

Yang Jian is managing editor of Automotive News China.