SAIC Taking Wrong Approach to Build Its Brands

China’s number 1 auto maker, Shanghai Automotive Industry Corp. (SAIC), is setting up a venture capital firm in Silicon Valley to tap advanced technology for its automobile brands back home. As Rose Yu writes in the WSJ’s China Real Time blog:

Chinese car companies, including SAIC, could do with all the help they can get, as the majority of Chinese consumers prefer foreign-branded cars. Chinese domestic brands’ market share in the country’s passenger-vehicle market fell to 36.5% in May from 39.4% in the year-earlier period, the ninth-consecutive month of decline, according to data from a government-backed industry group.

“Building a brand is an arduous job,” said Chen Hong, Chairman of SAIC Motors. “Chinese car makers must go upscale, otherwise the situation will be worse.

“In terms of sales, SAIC is a big car company. But when it comes to core technologies, we are far from strong enough,” said Mr. Chen, who became chairman in May. “Silicon Valley houses a number of emerging-technology companies. Having a footprint there will help improve our innovation ability.”

But how could “having a footprint in Silicon Valley” help improve their innovation ability? It’s not like breathing the Silicon Valley air will automatically make a company more innovative. Money isn’t only the way to acquire new technologies. The best innovations happen where the problems need to be solved. SAIC doesn’t need to look farther than China to find these.