Hafei, Changhe set for merger into Changan Auto

Shanghai, November 6 (Gasgoo.com) China's Ministry of Industry and Information Technology (MIIT) is pushing for the merger of Hafei Auto and Changhe Auto into Changan Auto Group, in an attempt to form a mini-vehicle giant of a million-unit capacity in China, reported Beijing News today, citing sources familiar with the matter.

According to MIIT's scheme, Changhe Auto and Hafei Auto -- the two car-making companies of China Aviation Industry Corporation -- will be merged into Changan Auto Group as its subsidiaries. After this merger, the expanded Changan Auto Group can restructure their mini-vehicle capacities, engine (and other parts) supplier relations, and sales networks. The three companies have been controlled by the central government, so the merger project will not interfered by local authorities.

"This will be more a government-urged restructuring project than an effort to expand the capacity. To boost the capacity separately is highly risky and will consume vast land resources, and construction of new plants might be blocked by many local regulations," said an MIIT insider, adding that great synergy can achieved more quickly and effectively by the merger of the three state-run car-making enterprises.

The three carmakers have much in common, as all of them originated from China's former military industry, with expertise in making mini vehicles powered by 1-liter to 3-liter engines. Their merger is expected to fulfill larger production, reduce the costs and improve their competitiveness.

After the merger, Changan Auto Group will become China's first auto giant of making 1 million mini vehicles annually. Last year, the output / sales of Changan Auto reached 800,000 vehicles, while Changhe and Hafei hit 400,000 units together. That means the merger of the three can immediately create a combined annual capacity of at least 1.2 million vehicles.

Japanese carmaker Suzuki Motor has reportedly proposed the merger of its two Chinese partners Changan Auto and Changhe Auto in its effort to help them promote their good unity and productivity and avoid bad competition with each other.