China auto groups urged to expand by mergers

Shanghai, February 25 (Gasgoo.com) As part of an industry restructuring plan, China has selected four auto-making groups to lead mergers and compete to become large-scale producers, Shanghai Securities Journal said on Wednesday.

The four groups are SAIC Group, FAW Group, Dongfeng Group, and Changan Group. The "Big 4" would be urged to expand through mergers at the national level, and would be candidates to become large-scale producers in the restructuring and consolidation of Chinese auto industry, said the newspaper, citing government planning documents. China will not soon approve of state-backed automakers' bid for overseas mergers and acquisitions (M&A).

Earlier this week state media reported that China aimed to cut the number of its major auto groups to 10 at most from 14, and expected to have two or three large-scale producers with annual production each exceeding 2 million vehicles. Those would be mission of the "Big 4." Last year, SAIC sold about 1.72 million vehicles, followed by FAW's 1.53 million units, and Dongfeng's 1.32 miliion units.

Besides its list of four major auto groups, the Chinese government has also chosen four smaller groups to carry out mergers at a regional level. They are Beijing Auto, Guangzhou Auto, Chery Auto, and Sinotruk (China National Heavy Duty Truck Group). The second-tier smaller automakers are each required to strive for production capacity of at least 1 million cars.

The plan, as part of an extensive stimulus package for the auto industry, is also aimed at boosting sales and production this year to 10 million units and keeping growth at about 10% in the next few years. One aim of the plan is to boost the market share of Chinese-brand auto manufacturers to at least 40% from the current 34%.

Chinese monthly auto sales surpassed those in the U.S. for the first time in January, largely because of the sharp drop in American sales. Total Chinese auto sales last year rose 6.7% to 9.38 million units, the first time that annual growth had fallen below 10% since 1999.