The S30 by Dongfeng rolls off the production line in Wuhan, Hubei province. The second-largest auto group by sales is moving to build greater in-house high-tech capacity. Photos provided to China Daily

Acquires Swedish firm to boost electronic controls

Dongfeng Motor Corp, China's second-largest auto group by sales, recently signed an agreement for its first overseas acquisition, a 70 percent stake in Sweden's T Engineering AB.

The takeover will help boost Dongfeng's research and development capacity, said the company in a statement.

The Chinese joint venture partner of several foreign automakers said it plans to acquire the remaining 30 percent T Engineering within two years. The value of the deal was not disclosed.

After joining Dongfeng, T Engineering will run as the first overseas R&D operation for the State-owned Chinese automaker, but will remain independent and undertake projects for other companies, the statement said.

Formerly a unit of Saab Automobile Powertrain AB, the company currently has just 32 employees. It has recently been working on R&D for combustion engine controls, hybrid and electric cars, and control systems for transmissions and chassis.

The operation has many years of experience in automotive software and electronics.

Dongfeng said that the new deal will make it "advanced internationally" in the area of electronic controls, long a weakness in many domestic carmakers.

The move will support the development of Dongfeng's own-brand vehicles, it added.

Based in Central China's Hubei province, Dongfeng is a major truck maker and has joint ventures with Nissan, Honda, Kia, PSA Peugeot Citroen and Yulon Motor Co from Taiwan to make passenger vehicles.

The company only started making its own-brand Fengshen cars three years ago. With four Fengshen models now on the market - the S30 and A60 sedans, the H30 hatchback and the H30 Cross SUV - the company said it plans to roll out more new products from 2012 to 2016 and cover all passenger vehicle segments.

The company announced at the end of last year that it will invest 30 billion yuan in its own-brand commercial and passenger vehicles over the next five years, with the target of selling 3 million of its self-developed vehicles in 2016, up from about 1 million in 2011.

Dongfeng sold 3.06 million vehicles last year, including 2.33 million passenger vehicles, mostly built by its joint ventures.

Its 2012 target is to deliver 3.3 million vehicles.

"Dongfeng's new deal is in line with the government's call for domestic carmakers to go abroad and seek solid technological resources," said Zhong Shi, an independent auto analyst in Beijing.

"Buying foreign technology is a shortcut for domestic carmakers to improve competitiveness, faster than doing all work all on their own," Zhong said.

Zhejiang Geely Holding Group, the parent of Geely Automobile, bought Australia's automatic transmission supplier Drivetrain Systems International in 2009.

In the same year, Beijing-based BAIC Group acquired the Saab 9-3 and 9-5 models and related engine technologies. The automaker also bought all equipment and core technologies of Swedish gearbox maker Weigl Transmission in 2011. Using the acquired technologies, the company plans to introduce a slew of new models carrying its own marques.

"It's good to see more Chinese carmakers participate deeply in international acquisitions," said Wu Jinghui, director of consulting firm AlixPartners. "They are learning to seek the resources they need from the vast international market."

She noted that buying expertise has a better investment return than acquiring a big package of assets, which seems more attractive but carries more risk.

Dongfeng said it plans to expand overseas R&D beyond electronic controls to drivelines and car platforms, and attract more European talent in automotive technologies.

The company added that its R&D team already started cooperation with T Engineering at the beginning of the year on three projects, yet declined to disclose the details.

In addition to Dongfeng, many domestic carmakers have already set up overseas R&D facilities to support the development of homegrown branded vehicles and narrow the gap with world-class products by foreign counterparts.

Shanghai-based SAIC Motor Corp, invested in an R&D center in the UK in 2005, which had played an important role in the introduction of the carmaker's wholly owned Roewe and MG vehicles.

Chang'an Automobile Group, headquartered in Chongqing, established its most recent overseas R&D center in Detroit last year, following facilities in Italy, Japan and the UK.

Domestic manufacturer Foton and JAC Motor also have R&D units abroad.

hantianyang@chinadaily.com.cn