Global Insight Perspective | |
Significance | Nanjing has announced that it plans to take on up to 250 workers to restart production of the MG-TF sports car at the Longbridge plant of the bankrupt MG Rover carmaker. |
Implications | Nanjing acquired the remaining assets of MG Rover last year and there was much scepticism that the company would actually retain production at MG Rover's traditional production site. However, although the announcement is good news, the proposed staffing levels and volume target of 15,000 units per annum fall well short of what was originally proposed. |
Outlook | Although in basic terms Nanjing's announcement that it intends to restart production of the MG-TF sports car at Longbridge is positive for the U.K. motor industry, there are still many question-marks over the project. Not least, there are doubts over the level of demand for a decade-old model from a Chinese-owned 'British' sports-car company. |
Limited Production to Restart at Longbridge
Chinese motor manufacturer Nanjing has announced plans to restart production of a version of the MG-TF sports car at the Longbridge facility in the United Kingdom, formerly the production heartland for bankrupt British carmaker MG Rover. Nanjing outbid its rival Chinese car company Shanghai Automotive Industry Corporation (SAIC) by paying £53 million (US$97 million) for MG Rover's remaining assets, including the rights to manufacture the TF sports car, in July last year. The company then stated its intention to restart production at the Longbridge plant, but most motor industry observers were sceptical that the plans would ever reach fruition.
However, in a press conference at the London Motor Show, Nanjing President Yu Jianwei outlined plans to employ up to 250 workers to form a production-line team for output of up to 15,000 units per annum (upa) of the MG TF. This vehicle would be assembled from completely knocked down (CKD) kits manufactured at the company's Chinese facilities, although no start date was given for production. Yu Jianwei reiterated that the company has secured a 33-year lease for the Longbridge site and claimed that this is evidence enough of the seriousness of Nanjing's plans. He said, ”If we weren't going to start production, why would we waste money on the lease?"
Unions Left Disappointed by Scale of Nanjing's Proposals
Nanjing also confirmed that it has already recruited a management team to run the new production line, made up of 57 staff, including a head of quality control and a head of sales and marketing. However, Dave Osborne, the Transport and General Workers Union's (TGWU) national secretary for the car industry, was less than equivocal about the announcement. He said, "Longbridge and car making go hand-in-hand so today's announcement that Nanjing is to produce a very limited number of vehicles again is welcome but it's well short of what they have previously said they'll do. Former MG Rover workers had been led to believe there were more ambitious plans than these, which is why today is a disappointment."
Outlook and Implications
Few details of the technical and styling modifications to the TF model were given, but it is likely that the car will be closely related to the final version of the TF to be produced by MG Rover in 2005, itself heavily based on the original MGF that first debuted in 1995. In addition, there was little information on the markets that Nanjing is targeting with its proposed production run, although Yu Jianwei did confirm that the company is in discussions with prospective dealers in the United Kingdom, France, Germany, Spain and Portugal. The only practical rationale for retaining Longbridge as a production base is that Nanjing wants to sell the cars in European markets.
However, it remains to be seen what market there is for a ”British” sports car from a Chinese-owned company that is based on a 10-year-old design. The pricing structure for the model would have to undercut state-of-the-art rivals such as the Mazda MX5 by up to 30% to have any hope of generating interest in a market where brand cachet and image is all-important. It is highly likely that untold damage has been done to the brand image and brand equity of MG following the bankruptcy of the company and the fire-sale of assets that followed. There are numerous obstacles that make the business case for this project look exceedingly shaky. The proposed volume target of 15,000 upa is a higher annual production figure than was ever achieved by the MGF or MG-TF at Longbridge, even during peak demand. And yet this figure is almost certainly too low to enable Nanjing to achieve the economies of scale required to ensure a price advantage over the model's competitors.