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The acquisition of Ssangyong by SAIC Motor may not be as promising as it seems. While the deal has been widely covered in both Chinese and international media, there are several underlying risks that could complicate this move. The challenges extend beyond Korean trade union resistance and the uncertainty of future development. A major concern is the financial stability of SAIC itself. If the company faces a capital chain problem during its aggressive expansion, it could end up in a similar situation to Delong, which collapsed due to overleveraging.
Another critical risk is that if SAIC’s capital structure becomes unstable, the burden might ultimately fall on the state. This is a key difference between SAIC, a large state-owned enterprise, and Delong, which was a private company. This financial vulnerability might explain why Hu Maoyuan, SAIC’s chairman, took such a bold step to acquire Ssangyong, despite the uncertainties involved.
The acquisition has sparked significant controversy in South Korea, especially among Ssangyong’s employees. There has been growing opposition from the company’s labor unions, which have historically played a powerful role in South Korean industries. Reports indicate that the union plans to strike, demanding greater involvement in decision-making and protection of jobs. These demands directly relate to concerns over SAIC’s potential control over Ssangyong.
In addition to union resistance, the Korean market presents unique challenges. South Koreans generally favor domestic brands, and the automotive sector is highly competitive, with Hyundai-Kia dominating 70% of the market. SAIC’s entry into this saturated environment could lead to unpredictable outcomes.
SAIC is already heavily investing in multiple projects, including partnerships with GM and Volkswagen, as well as acquiring assets like Rover and planning new production bases. These initiatives require massive capital, potentially exceeding 500 billion yuan. However, financing such a large-scale expansion is no easy task.
Currently, SAIC relies on three main funding sources: listed financing, loans, and external investment. However, the prospects for an overseas listing remain uncertain, and the company’s debt-to-asset ratio is already high. Securing loans is also difficult due to tightening monetary policies. Meanwhile, venture capital is hesitant to invest in the auto industry, given the rising risks and declining profits.
If SAIC cannot secure sufficient funds, its capital chain could become unstable, leading to serious consequences. Analysts warn that without careful management, the company could face a fate similar to Delong. For now, the road ahead for SAIC remains uncertain, and the success of the Ssangyong acquisition will depend on how well the company navigates these financial and operational challenges.
October 01, 2025