BAIC mulls electric IP acquisition

Financial woes prompting US maker of green cars to sell off its assets to the highest bidder

Driven by an interest in green vehicles, BAIC Group is joining a host of other companies that are considering buying assets from the ailing Fisker Automotive Inc.

According to domestic media reports, the Beijing-based automaker recently sent a delegation to visit the US electric car company in Anaheim, California, because it plans to buy the intellectual property and patent for Fisker's Atlantic plug-in hybrid car.

The reports said that BAIC expects to accelerate the development of its own electric car business through the possible deal.

Currently, BAIC makes the E150 electric vehicle, a 4-meter-long compact hatchback, which began use in taxies and car rental services in the capital city this year.

The company plans to make bigger, high-end electric cars as well.

Previously, Zhang Xin, vice-president of BAIC Group, was quoted by domestic media reports as saying that in 2015 the company expects to roll out cars that can compete with Tesla's model S, an American premium electric sedan that retails from about $50,000 to $70,000.

The high cost of batteries might be one reason that BAIC is looking to produce high-end electric models, said Zhong Shi, an independent auto analyst.

"In the near term, the cost of batteries won't come down significantly, and the price of electric vehicles will stay high," he said.

"In such circumstances, there won't be a truly cheap, budget electric car for the majority customers, but expensive, high-end electric vehicles might find a niche in the market," he said.

Similar to Tesla, Fisker makes premium electric cars. Its only product that has hit the market - the Karma - sells for more than $100,000.

The Atlantic model of which BAIC is seeking ownership is among the several new products that Fisker has been working on. Its prototype was first displayed in New York last year, and the car is positioned to be cheaper than the Karma.

But due to financial problems, Fisker had to stop developing new models and has so far eliminated the majority of its workforce. The company may have to go bankrupt if it cannot find new investors soon.

Earlier this year, Chinese carmaker Zhejiang Geely Holding Group Co and Dongfeng Motor Corp both showed interest in Fisker but withdrew from the bidding later.

Among the many suitors is also China's automotive component company Wanxiang Group, which expects to make inroads into vehicle manufacturing. It is considered a likely winner by some analysts because it already bought the A123 System, which is Fisker's battery supplier. Analysts said that BAIC's bid does not conflict with Wanxiang because they have different approaches.

"If BAIC buys the Atlantic, Wanxiang could still take over Fisker for a lower price," said Alfred Tian, an independent auto analyst.

Tian added that "compared to a full merger and acquisition, buying specific models and intellectual property can actually offer more practical help to the buyer while avoiding the difficulty of post-merger integration".

"BAIC must have learned from its previous deal with Saab," he said.

In 2009 BAIC bought the intellectual property of the 9-3 and 9-5 models of Swedish brand Saab. Based on the acquired technologies, the carmaker developed its luxury Senova. By comparison, other domestic bidders that attempted to buy the controlling stake in Saab all failed later.

Tian also said he disagrees with the idea that buying the Atlantic could help BAIC achieve a technology breakthrough in green vehicles. He pointed out that Fisker has no core competitiveness in powertrain because its hybrid drive train is sourced from another company Quantum Technologies.

"Fisker's own strength is its exterior and interior design, so buying the Atlantic may help BAIC more in the design work of its own high-end vehicles rather than improving its alternative-energy know-how," he said.