Press Comment : just-auto’s take on Premier Wen’s visit to MG Birmingham

The UK’s leading consumer motoring titles do not seem to have given much, if any, coverage to Chinese Premier Wen Jiabao’s visit to MG Birmingham last Sunday. Indeed, Dave Leggett, Managing Editor of authoritative Automotive Industry website, seems to be the only commentator to have fully understood the visit’s real significance…

Three things seemed to underline the seismic shift in the balance of the world economy last week.

First, in what is an increasingly sad state of affairs, Saab appears to be slipping away from having a chance to get back to normal operations. Whatever one might say about General Motors’ stewardship, this is an ‘old Europe’ company and brand that ought to have a chance. The plain fact of the matter is though, it can’t get the volume to survive quickly enough. There’s a cash crisis that appears to be getting worse, confidence – especially among suppliers – ebbing away. The big hope in the business plan is to break into China. But there isn’t much runway left.

The second thing is the state of the single currency and sovereign debt crisis in Europe. The pressures at work are considerable and another patch-up bailout for Greece is being seen by many as the least worse solution. Big cuts are coming to real incomes in Greece and in other bailed out and severely indebted countries in the eurozone. They can’t devalue their currencies to get out of trouble, as they would have done once, and the people in these countries are not exactly happy about the ‘pain’ they are being told that they have to endure.

The euro project was supposed to mean growing incomes across the continent so that everyone could eventually get to Germany-style affluence – a ‘levelling up’. It hasn’t quite worked out that way and if Spain gets dragged in to the financial crisis, worries multiply big time. The German economy may be performing well – on the back of strong exports to Asia – but it’s a fragile situation in Europe generally that threatens international financial instability.

And amid the political squirming in Europe, in flies Chinese premier Wen Jiabao to the UK and Germany for our third observation. The Chinese are now in a very powerful position, economically speaking. China has a huge trade surplus and its economic growth has been bailing out the world’s economy over the last few years.

One way out from some of the world’s economic imbalances is for China to import yet more, for Chinese people to consume more Western goods. For all the economic growth that there has been in the past ten years, there’s still a lot of untapped potential. Expect to see Western politicians fawning over Chinese leaders in a bid to capture some of that growth for their own countries’ firms.

However, the Chinese will want things on their terms. China has deep pockets and has increased spending on some European Government bonds lately. Hard pressed Hungary, for example, has had significant financial assistance from China. In the UK, Wen Jiabao visited Longbridge in Birmingham, once home to the UK’s biggest car plant. It’s now a much smaller assembly facility owned by SAIC. He talked positively about how the Chinese-owned company can design cars in the UK. And the British aspect to the Roewe brand in China does indeed play well there.

But how much activity – whether designing or making – the cars is ever going to be in Britain? I would guess not a huge amount. It will be maintained at a level that is commensurate with keeping the British link alive from a brand standpoint, plus any assembly of MG cars for sales in UK/Europe (low and likely to remain so – the Chinese market is where the sales bulk is) while also quietly utilising the European design arm (not least from an acquisitive technology learning perspective; designers and engineers from European firms can be lured to it).

So, there you have it. Yes, MG is an interesting case study and one that underlines the shift still taking place in the global economic order.

And good luck to those still trying to sort out Saab.


Clive Goldthorp


  1. One of the key reasons for Wen Jiabao’s visit to Longbridge was possibly to address another imbalance: despite having money to spend, the amount of investment from Chinese companies in Europe is far lower than the investment of European (particularly German) companies in China.

    Premier Wen also visited Germany and the impression given here is that the Chinese Government wants to encourage local companies to invest more in Europe.

  2. European car companies have traditionally set up shop with a local manufacturer in China to get access to the market there (eg. Dongfeng Peugeot-Citroën Automobile, Shanghai-Volkswagen), but the tables could be turning with some marques such as MG/Roewe, Volvo and, possibly, Saab coming under Chinese control…

    Anyway, with China looking set to become the next superpower, cosying up in a time of recession is a good move for any Western leader.

  3. My personal opinion is that the global economy is unlikely to recover significantly until China gets fully developed and their wages climb signficantly and/or the West’s (UK/Europe/North America/ Australasia/ Japan) wages drop to that of the average Chinese and Indian wages (give or take a bit).

    One interesting thing about Greece is that the country would probably be in receivership by now if it was a company. Who ever has lent them (the people) the money can effectively just take title of the country or its assets – probably not in reality but a war of money rather than a war with guns.

    However, I can see a handful of rich people in the world buying up land in Greece and other places if they haven’t done so already. I guess, though, that this may not be the right place to write about that.


  4. I think all the motoring journalists and major motoring magazines have missed the significance of the MG Roewe deal and Zhejiang Geely Holding Group Company Limited’s purchase of Volvo – their failure reminds me of the late 1960s when motoring hacks didn’t see the threat from Japanese players at all.

    SAIC Motor is China’s biggest car company and consolidation will fuel growth. Chinese wages are one tenth of the West’s so they could flood the market with cars at half the price of a western brand. I think they will and when a VW Golf – the darling of motoring journalists – is £25k and you can get an MG5 for £12k you will see the market power shifting.

    The UK population are already experiencing falling wages and tax rises. Purchase price will become critical. The MG6 is just a toe in the water expercise – still too expensive and no diesel option but that will change when SAIC Motor wants volume in the USA and Europe.

    I suspect that, in 20 years time, the only European brands left will be the premium ones – Audi, BMW, Mercedes-Benz and maybe Jaguar Land Rover. That’s why GM wants to offload GM Europe – no profits and a high cost base. Ford will eventually do the same.

    The Germans will remain upmarket with lower volumes and the French will ban Chinese imports and close their markets to the rest of the world. The UK will be bankrupt by then and cars will be a rare sight with only the wealthy affording them. Young people and pensioners will be back on the bus.

  5. @Simon

    I agree with what you say about the MG6: it is a toe in the water exercise for SAIC Motor and, if it sells and meets their pretty low sales forecasts, then it will have done its job of re-establishing MG in the UK and the rest of Europe.

    However, it is the next generation of models (the 3, 5 and 7) which will exploit the success of the 6 – if those cars are well designed, well made and price competitive, then MG will prosper.

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