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The acquisition of Ssangyong by SAIC might not be as beneficial as it seems. While the deal has sparked global media attention, it comes with significant risks. The challenges are not only from South Korean trade unions and uncertain future development but also from SAIC’s own financial constraints. If SAIC faces a capital chain issue during its aggressive expansion, it could end up in a similar situation to Delong, which collapsed due to financial mismanagement.
Another concern is that if SAIC Capital encounters similar problems, the burden will ultimately fall on the state. This is a key difference between SAIC, a major state-owned enterprise, and Delong, which was privately owned. It may explain why Hu Maoyuan took such a bold step to acquire Ssangyong. The outcome of this deal remains unpredictable.
From late last month to now, the acquisition has been a hot topic for both Chinese and international media. However, few have noticed the growing opposition in South Korea, especially within Ssangyong itself. SAIC is caught in a difficult position, trying to secure the deal while facing internal resistance.
On July 27, SAIC and Chao Ching Bank (CHB) reached a binding memorandum of understanding for the acquisition of Ssangyong Motor. According to the agreement, SAIC will conduct due diligence before signing a formal contract. After approval from the Chinese government and Ssangyong’s creditors, SAIC will acquire 48.9% of the shares, potentially increasing it to 51% by purchasing additional stakes from Daewoo Heavy Industries and other investors. The total cost is estimated at around $500 million.
Despite hiring Ssangyong’s current president, Soh JinKwan, as the head of operations, SAIC plans to invest hundreds of billions of won over the next five years to develop new models and boost production. However, the biggest obstacle may still be Ssangyong’s powerful labor unions.
South Korean media reported that Ssangyong’s union planned a strike on July 22, demanding participation in decision-making processes, including forming an overseas business strategy committee and having a say in board decisions. These demands directly relate to the concerns surrounding SAIC’s takeover. The union has long opposed selling the company, and previous attempts by Bluestar Group were abandoned due to lack of union support.
In South Korea, labor unions hold significant power, often influencing company policies and even causing economic instability. Some reports suggest that union demands for high wages and job security have driven companies abroad, creating tension with government agencies.
SAIC’s president, Hu Maoyuan, called the acquisition a strategic move to expand internationally. He expressed optimism about the partnership, believing it would benefit employees, shareholders, and strengthen China-South Korea trade relations. However, analysts warn that the Korean auto market is highly saturated, with Hyundai-Kia dominating 70% of the sector. SAIC’s entry into Ssangyong could have unpredictable consequences.
With a huge funding gap exceeding 100 billion yuan and massive investment plans over the next three to five years, SAIC faces serious financial challenges. Even though paying $500 million for Ssangyong isn’t a big deal for them, the risk lies in their tight capital chain. Analysts note that SAIC’s investments include partnerships with GM and Volkswagen, requiring matching funds. For example, GM plans to invest $3 billion in Shanghai General Motors, and SAIC must match that amount. Similarly, Volkswagen aims to invest €3 billion in Shanghai Volkswagen. These projects alone require at least RMB 40 billion.
SAIC’s expansion hasn’t stopped. In addition to acquiring Ssangyong, they previously bought a 10% stake in GM Daewoo and planned a new production base. They are also negotiating to acquire a 50% stake in Rover and collaborate with Fuji Heavy Industries. If all these plans come to fruition, the funding needed will exceed 500 billion yuan—a massive sum for SAIC.
Financing such a large amount is extremely challenging. SAIC relies on listed financing, loans, and attracting outside capital. However, listing is still far off, and even if successful, it may only raise $2 billion. Loans are difficult given the country’s tightening monetary policy and SAIC’s already high debt-to-asset ratio. Attracting outside capital is also unlikely, as many investors are wary of the automotive industry’s declining profitability and increased risks.
If SAIC cannot secure enough funds, its capital chain will be in danger. The best solution may be to slow down expansion. Otherwise, history could repeat itself, leading to another Delong-like collapse.
October 01, 2025