Ger­man En­gi­neer­ing For Chi­nese Wannabes

Au­tos ▶ Borg­ward res­ur­rects a 1960s name­plate for main­land yup­pies ▶ “You can’t just repack­age a brand that’s been de­funct for years”

Bloomberg Businessweek (North America) - - Companies/ Industries -

In most markets, res­ur­rect­ing a car brand that last built an au­to­mo­bile the year John F. Kennedy be­came pres­i­dent would ap­pear fool­hardy. Un­less, it seems, you want to sell in China. Ger­many’s Borg­ward Group, the lat­est as­pi­rant to tackle the world’s big­gest auto mar­ket, saw its last Is­abella coupe roll off a pro­duc­tion line in 1961. But with the help of sta­te­owned Chi­nese truck­maker Beiqi Fo­ton, the re­vived brand be­gan sales of an SUV last month in Bei­jing.

Borg­ward Chief Ex­ec­u­tive Of­fi­cer Ul­rich Walker is count­ing on Chi­nese con­sumers’ affin­ity for for­eign brands— more than half of new au­tos sold there last year sported a for­eign name­plate— and rev­er­ence for Ger­man en­gi­neer­ing to spur sales. “It’s Ger­man DNA, gen­uine de­sign, long his­tory,” says Walker, a former Daim­ler ex­ec­u­tive in Asia who ear­lier led the Smart brand. “We po­si­tion our­selves above Ja­panese and Kore­ans, but be­low or close to Volk­swa­gen” and will tar­get welle­d­u­cated young fam­i­lies who “would be happy to buy a BMW but couldn’t af­ford it and wouldn’t buy a cheap brand.”

Borg­ward traces its roots to 1924, when Carl F.W. Borg­ward, an en­gi­neer, de­signed and built a mo­tor­ized car­rier cy­cle called Bl­itzkar­ren. By the 1950s it was the third-largest car­maker in Ger­many and ac­counted for 60 per­cent of the coun­try’s auto ex­ports. Its best-known model, the Is­abella, was in­tro­duced in 1954. The fam­ily sports car had a 1,493cc en­gine with an out­put of 60 horse­power. The com­pany was forced into liquidatio­n in 1961, after sales de­clined in the U.S.

The new Borg­ward, re­born in 2008 by the founder’s grand­son, is build­ing its first model, the BX7 SUV, at a pro­duc­tion line in Beiqi Fo­ton’s plant in Bei­jing. The line has an ini­tial an­nual ca­pac­ity of 100,000 ve­hi­cles, which can be in­creased to 360,000 units. Borg­ward is still seek­ing an assem­bly site in Europe, where it plans to sell plug-in elec­tric ver­sions of the BX7.

The go­ing in China will be tough, be­cause even es­tab­lished car­maker Honda has strug­gled to make a suc­cess of its premium Acura brand there, says John Zeng, an an­a­lyst in Shang­hai for LMC Au­to­mo­tive. Acura sold only about 4,200 ve­hi­cles in China last year. “Premium car brands have a long his­tory. You can’t just repack­age a brand that’s been de­funct for years and tell Chi­nese cus­tomers it’s a premium brand,” Zeng says. “No one will eas­ily fall for that and make a pur­chase. You need to have a sell­ing point.”

To im­prove its chances of suc­cess, Borg­ward stud­ied the ex­pe­ri­ences of an­other re­cent en­trant, Qoros Auto, a ven­ture be­tween Is­rael’s Kenon Hold­ings and China’s Ch­ery Au­to­mo­bile. When Qoros in­tro­duced its first sedan three years ago, it priced the car about 20,000 yuan ($3,072) higher than most for­eign mass-mar­ket brands. Qoros sold a dis­ap­point­ing 14,001 cars last year vs. the 570,889 ve­hi­cles de­liv­ered by Volk­swa­gen’s Audi unit in China and Hong Kong.

So Borg­ward de­cided to make its first model an SUV to re­flect the shift in con­sumer pref­er­ence to­ward more-flex­i­ble ve­hi­cles, says spokesman Victor Guo. And Borg­ward set the start­ing price of its BX7 at 169,800 yuan, or about 15 per­cent cheaper than VW’S Tiguan, one of the best-sell­ing SUVS in China.

To woo young car buy­ers, Borg­ward is of­fer­ing a 12.3-inch touch­screen con­trol panel and life­time In­ter­net ac­cess for the first 10,000 buy­ers. The com­pany has signed up 100 deal­ers and aims to dou­ble that num­ber by the end of next year. While tout­ing its Ger­man prove­nance, the au­tomaker has tapped sup­pli­ers around the globe to help keep costs down. Borg­ward de­vel­oped the BX7’S en­gine on its own but is us­ing auto com­po­nents from Ger­many’s Robert Bosch and Ja­pan’s Aisin Seiki, work­ing with China’s Huawei Tech­nolo­gies for cloud

The bot­tom line Borg­ward, which hadn’t built a car since 1961, is try­ing to woo Chi­nese buy­ers who want Ger­man en­gi­neer­ing at a bar­gain price.

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