## Shanghai Automotive—Going for the Gold, but What About Green?

##### 26 September 2004

Fortune profiles the work and aspirations of Shanghai Automotive Industry Corp. (SAIC): JV partner with both GM and VW, and a growing powerhouse in its own right.

The joint ventures have proved a bonanza for SAIC, which has more than doubled in size since 2000. Last year it produced 612,216 cars with VW and GM, a startling increase of 57% from 2002. That has catapulted SAIC onto FORTUNE’s list of the world’s largest companies at No. 461, with revenues last year of $11.8 billion and profits of$689 million.

There’s nothing shy about SAIC. It has an enormous appetite for growth and is already casting its eyes beyond China’s borders. Officials have immodestly declared their intention to become one of the world’s six largest automakers by 2020, joining GM, Toyota, Ford, DaimlerChrysler, and VW. To get there, they expect to quadruple vehicle production. Analysts believe those ambitions are realistic. “SAIC will become one of the top ten car companies in the world within the next ten to 15 years,” says Graeme Maxton of Autopolis, an industry consultant in Britain. “It is likely that teenagers in Europe or the U.S. will be considering a Shanghai Auto car within the next decade.”

Last year SAIC was the biggest car seller in China. Earlier this year, it overtook FAW to become the largest vehicle seller in the country. This all begs the question: what will its vehicle mix be as it continues to grow? What is its Green strategy? China appears keenly aware of the knife-edge it is walking—or running—as the development of the economy drives energy usage, auto purchases and brings with that the attendant issues of emissions and energy supply.

Both Chinese auto makers and consumers are putting unprecedented importance on environment-friendly and fuel-saving vehicles as gasoline prices continue to rise. People’s Daily

But given that SAIC has yet to produce a model under its own marque, it’s still a bit of an unknown. Earlier this year (post) GM suggested that it might build its first hybrid passenger car with SAIC—but, as we’ve seen, “hybrid”could mean anything from power support to a full parallel drive.

We may get a better sense of this next month, as the annual Michelin Challenge Bibeundum is held in Shanghai. The Challenge Bibendum is an international competition for environmentally-friendly vehicles. This is the first time the Challenge (started in 1998) has been held in Asia, and the major Chinese automakers will all be there.

In 2003, SAIC and scientists from Tongju University showed China’s first hydrogen fuel cell car, the Chao Yue I. A second generation, the Chao Yue II appeared earlier this year. (Both cars used fuel cells from Shanghai ShenLi High Tech.) Chao Yue II will be in the Challenge next month.

Accordinto to the Chinese Ministry of Science and Technology, the Chao Yue II has dramatically reduced hydrogen consumption from Chao Yue I’s 1.39kg per 100 km to the current 1.03 kg per 100km. Acceleration from 0-60 mph has improved from 46.7 seconds to 26.7 seconds. The new prototype reaches a maximum speed of 118 km/h (73mph) with a cruising range of 197 km (122 miles). However, the new version uses a Chinese fuel cell, battery and engine, shaved 150 kg off the weight, and improved the output by 6kW (8 hp).

More to do? Of course. But one thing upon which everyone agrees: the size and impact of the Chinese market is worth it.