Changan to take over carmakers from AVIC

Shanghai, November 10 (Gasgoo.com) China's Changan Automobile Group announced today that it would take over two automakers under the Aviation Industry Corporation of China (AVIC), the country's national aircraft maker, Xinhua News reported. This is the largest merger deal in the Chinese auto industry for years.

The parent of Chongqing Changan Automobile Co Ltd will acquire Harbin Hafei Automobile Industry Group and Jiangxi Changhe Automobile from AVIC, top officials of Changan and AVIC announced this morning at a high-profile press conference in the Great Hall of the People in Beijing.

The restructuring will also involve Changhe Auto's joint venture Changhe Suzuki Automobile Co. and AVIC's auto-parts company Harbin Dongan Auto Engine Co., together with joint venture Harbin Dongan Mitsubishi Automotive Engine Manufacturing Co. The financial details of the deal have not been disclosed yet.

After its auto-making business and auto-parts assets are merged into Changan, AVIC will hold 23% stake in the new Changan Automobile Group, with the majority 77% share to be controlled by Changan Group's parent China Weaponry Equipment Group. Changan and AVIC are both military-turned-civil enterprises owned by the state.  

Changan Auto Group, a Chinese partner of Ford Motor and Mazda Motor, sold 127,600 vehicles last month, up 122% from a year earlier, and total sales for the first ten months grew 57% to 1,131,500. It is vying with Dongfeng Motor Group to become the third biggest Chinese automaker (after SAIC Motor and FAW Group).

The restructuring will boost Changan Auto Group's annual auto production capacity to nearly 2 million units. The restructured group aims to sell more than 2.6 million vehicles by 2012. It targets sales reaching 5 million units by 2020.

The Chinese government announced earlier this year that it plans to encourage consolidation of its auto companies into a "big four" and a "small four" segment to make the industry more competitive with established foreign rivals.