Hafei Auto's parent and Changan in talks for merger

Shanghai, August 12 (Gasgoo.com) Aviation Industry Corp of China (AVIC), the parent of Hafei Auto Group and Changhe Automobile, in still in talks with Changan Auto Group for a proposed merger in an attempt to form a mini-van giant in China, the 21st Century Business Herald reports Wednesday.

A senior AVIC official told reporters that the two parties still keep in touch on the matter but no agreement has been reached so far.

Sources in Changan Auto said one possibility is to integrate both Hafei and Changhe into Changan Auto. The result will be that Changan Auto can restructure their minivan capacities, engine (and other parts) supplier relations, and sales networks.

Changan said in June it plans to double its minivan capacity to 1.2 million units from the current level in two years and triple that capacity to 1.8 million units within five years.

"The deal depends on whether AVIC would like to drop its auto divisions," said Cao He, an auto industry analyst from China Minzu Securities Co.

AVIC launched its auto division in Beijing this March with Hafei Auto, Changhe Auto, Dongan Power and some other auto or auto-parts businesses of AVIC included in it. AVIC determined at that time to boost its auto business and expects its auto division to achieve sales revenue of 26 billion yuan ($3.8 bn) and gain 3.5% market share in China by 2011, with annual sales of 400,000 vehicles and 800,000 engines.

In related report, PSA is resuming partnership talks with Hafei and the two sides may sign a JV deal as early as this September.