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German engineering for Chinese wannabes
Bloomberg | 2016/5/10

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 state-owned Chinese truckmaker Beiqi Foton, the revived brand began sales of an SUV last month in Beijing.

Borgward CEO Ulrich Walker is counting on Chinese consumers' affinity for foreign brands 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 well-educated 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 hp. The company was forced into liquidation in 1961 after sales declined in the United States.

The new Borgward was revived in 2008 by the founder's grandson. It 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. Borgward also is seeking an assembly site in Europe, where it plans to sell plug-in electric versions of the car.

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 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 Co.

When Qoros introduced its first sedan three years ago, it priced the car about 20,000 yuan ($3,100) 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 versatile vehicles, said spokesman Victor Guo.

Borgward set the BX7's starting price at 169,800 yuan, which is 15 percent cheaper than the VW Tiguan, one of the best-selling SUVs in China.

To woo young car buyers, Borgward is offering a 12.3-inch touch screen on the 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 components from Robert Bosch GmbH and Aisin Seiki. The company also is counting on Huawei Technologies for cloud technologies and LG Electronics for batteries.

"We only do in-house what can't be outsourced," Walker says, "because although we are a company with heritage, we are also a new company."

Related Stories
  • Mobility service provider Ucar to acquire control of Borgward
  •     --Published:2019/22/3
  • Foton to sell 67% stake in Borgward to ride-hailing company, consultant
  •     --Published:2019/11/1
  • Chinese-owned Borgward plans SUV sales in the U.K., Ireland
  •     --Published:2018/30/11
  • Foton offers to sell majority stake in Borgward
  •     --Published:2018/12/10
  • Borgward is back in Germany
  •     --Published:2018/31/7
  • Borgward picks first dealership in Europe
  •     --Published:2018/24/7
  • Foton to inject 4.4 billion yuan in Borgward
  •     --Published:2018/29/6
  • Rolls-Royce's engineering chief joins Borgward
  •     --Published:2018/8/5
  • Borgward draws on 1950s heritage with modern Isabella
  •     --Published:2017/15/9
  • China's Lynk, Borgward brands seek footing in Europe
  •     --Published:2016/13/12
  • Borgward plans joint venture with Faurecia to build seats in Tianjin
  •     --Published:2016/2/12
  • Borgward plans to assemble EVs in Germany
  •     --Published:2016/1/11
  • Borgward readies China sales, mulls site for German output
  •     --Published:2016/28/3

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