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Chang'an deal signals new wave of consolidation
By Yu Qiao (China Daily)
Updated: 2009-11-16 07:57 China's automotive industry might now be the world's biggest, but it also one of the most fragmented. Yet if Chang'an Motor Corp's landmark acquisition of Aviation Industry Corp of China's (AVIC) major auto assets last week is a sign of things to come, a new round of consolidation has now begun. Chen Bin, an official from the National Development and Reform Commission, China's top economic planner, said last week that other carmakers are also talking about mergers or acquisitions. Chen declined to reveal any details, saying they are "secrets of enterprises". "We support consolidations between automakers. We will join other industry regulators to create a favorable policy environment for reshuffling," he said. Miao Wei, vice-minister of industry and information technology, said last month that his ministry will implement a range of measures before the end of this year to increase auto industry consolidation. Chang'an acquisition Chang'an, the fourth-largest Chinese motor group with partners Ford Motor from the US and Japan's Isuzu Motor, last week acquired Hafei and Changhe - two minibus makers - and engine producer Dong'an Auto from AVIC. Assets of Changhe's car joint venture with Suzuki, and the Dong'an engine tie-up with Mitsubishi Motors, were also injected into Chang'an, which is based in the southwestern municipality of Chongqing. In return, AVIC will obtain a 23 percent stake of the enlarged Chang'an from the carmaker's State-owned parent China Weaponry Equipment Group. No financial details for the deal have been revealed. Through the deal, Chang'an raised its annual production capacity to more than 2 million vehicles from 1.5 million units and vaulted to become the third-biggest auto group in China, surpassing Dongfeng Motor Corp. Chang'an President Xu Liuping said the group aims to boost annual sales to more than 2.6 million vehicles within the next five years and 5 million units over the next decade. In the first 10 months of this year, Chang'an sold a total of 1.16 million vehicles, a 10.7 percent share of the overall auto market in China. Other major motor groups in China are also in merger negotiations with smaller competitors. Beijing Automotive Industry Holding Corp, the No 5 automaker, expects to finalize a deal at the end of this year to buy a 40 percent stake of Daimler AG's van joint venture with Fujian Motor Industry Corp, according to industry sources. The Fujian group will slash its stake in the 40,000-unit van venture to 40 percent from 50 percent. Beijing Automotive now runs two car partnerships with Daimler and South Korea's Hyundai Motor Co.
Guangzhou Automobile is the partner of Japan's Honda and Toyota as well as Italian carmaker Fiat Auto. The central government hopes to form two or three auto groups with an annual production of more than 2 million vehicles each, and four to five groups with annual output of more than 1 million vehicles by 2012 through consolidations in the industry, according to a plan launched in March this year. The government also expects that combined production of the top 10 motor groups will account for more than 90 percent of total vehicle production in China in this period. Vehicle production in China is predicted to hit 13 million units this year, up from 9.35 million units in 2008. In the first 10 months of this year, the production surged by 36 percent year-on-year to 10.9 million units, according to data from the China Association of Automobile Manufacturers.
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