New guidelines for mergers in auto industry expected at year end

15:37, September 14, 2010      

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The automobile industry ranked first among the six industries associated with the "Opinions of the State Council on Accelerating the Corporate Mergers and Acquisitions and Reconstruction" recently released by the General Office of the State Council.

It is known that the Ministry of Industry and Information Technology has started drafting the specific policies on promoting mergers and acquisitions in the automobile industry and is estimated to release the policies at the end of 2010. This likely marks a new round of mergers and acquisitions in China's automobile industry in 2010.

The automobile industry restructuring and revitalization plan released in March 2009 had already set the domestic merger and acquisition objectives. The outline called for the formation of two to three large automobile groups with annual output and sales exceeding 2 million units and four to five automobile groups with annual output and sales exceeding 1 million units. It also said that the number of automobile groups controlling more than 90 percent of market shares should be cut from 14 to less than 10.

However, aside from the Guangzhou Automobile's acquisition of Changfeng Motor and Gonow Auto, Beijing Automobile Works' (BAW) acquisition of Guangzhou Baolong Auto and its plans to establish a mini-car joint venture with Chongqing Yinxiang, there have been no large acquisitions in the domestic automobile industry over the past one and half years. The rumored merger of Chery and JAC Motors, BAW's acquisition of Fujian Motor Industry Group and Guangzhou Automobile's takeover of Brilliance Auto have not materialized.

An executive from an automobile group said in an interview that the next five to 10 years are a golden period for mergers and acquisitions in the automobile industry. It will be a time for improving the current situation where Chinese automakers are large in number but small in size. This major move made by the government further aims to change the current stagnant situation in the automobile industry.

According to the data from the China Association of Automotive Manufacturers, only five domestic auto makers, SAIC Group, FAW, Dongfeng Automobile, Changan Automobile and BAW sold more than 1 million automobiles in 2009.

The top 10 automakers in terms of sales volume sold a total of 11.9 million units, accounting for 87 percent of the total. Most of the 130 domestic carmakers produce and sell less than 10,000 cars a year. There are also several hundred automobile modification and special vehicle producers at home. Therefore, experts say it is urgent to restructure the automobile industry.

By People's Daily Online


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