Changhe Auto, Hafei Auto to develop separately

Shanghai, November 3 (Gasgoo.com) The China Aviation Industry Group Corporation (AVIC), formed following a government-ordered merger between AVIC I and AVIC II one week ago, will develop its two subsidiary automobile companies separately, the Economic Observer reported Monday in Beijing.

"The Harbin Hafei Automobile Industry Group and Jiangxi Changhe Automobile Co will focus on their own auto operations independently, without a substantial consolidation between the two,” Wang Shuhong, marketing director of Changhe Auto, told the newspaper.

State-run aircraft maker AVIC II controls both the Hafei Auto and loss-making Changhe Auto and the aviation group has long been planning to combine the two automakers to avoid their product confrontations.

But industry experts have been skeptical of the synergies of the combined companies. According to Jia Xinguang, an independent auto analyst based in Beijing, such a move might result in a heavier burden for the aviation group.

Actually back in 2002 the two sister automakers together occupy some 40.9% of China's mini-vehicle market, but since then, their market share has been dwindling due to lack of product variety and weak control of costs. By the end of this year the two automakers are expected to report losses of 353 million yuan ($51.6 mln).

Despite heavy losses, the two auto companies are making efforts themselves to meet challenges. Hafei’s sales manager announced recently the car maker will launch two new models, the re-vamped Saima and Saibao models for the first two quarters each next year.

In its latest five-year plan Changhe Auto stressed that it will manage to make profits in 2008, and its sales volume is set to hit 400,000 units by 2010. The Suzuki Splash will be produced in joint venture Changhe Suzuki Automobile in 2010.