China plans to support fewer stronger carmakers

China has unveiled its most concrete plan yet to reform and rev up the auto industry. The State Council said on Friday that it will concentrate more power in the hands of fewer auto companies.

The plan said China's auto industry has been impacted by the global financial crisis since the second half of 2008. Profits at major car companies have dropped off significantly. The country needs to speed up its restructuring of the industry, but has been hampered by outdated technology and weak innovation.

Under the Council's plan, China aims to raise domestic car sales to 10 million units this year. The plan also targets a 10 percent sales growth each year for the next three years.

The strategy promotes mergers and acquisitions by combining the country's 14 major automakers into ten. This policy will aid product innovation and slash wasteful spending.

The government's long-term vision of the auto market landscape in China is one in which three large automakers sell more than two million vehicles per year, and at least four smaller groups sell over one million.

The plan also includes more government incentives to boost auto purchases as well as improve auto service. Also, the government pledges to spend more on the development of hybrid vehicles.