Changan Auto claims China's No.3 spot with AVIC deal

The state parent of Chongqing Changan Automobile Co has agreed to take over major auto assets from aircraft maker Aviation Industry Corp of China (AVIC), heeding Beijing's calls to speed up restructuring in the fragmented auto industry.

The deal unveiled on Tuesday marks the latest major consolidation of the world's biggest auto market and will boost Changan to No.3 from No.4 among China's 100-plus car markers.

Changan Automobile Group, a Ford Motor partner, will take over minivan maker Harbin Hafei Automobile Industry Group and the China ventures of Suzuki Motor Corp and Mitsubishi Motors Corp from AVIC, Changan said in a statement.

State-owned AVIC will get a 23 percent stake in the enlarged Changan Auto Group in exchange for the assets, which also include Harbin Dongan Auto Engine Co and Jiangxi Changhe Automobile Co.

Shares in the listed companies involved in the asset transfer were suspended from trade before the announcement.

Chinese automakers are mostly regional players, controlled by local governments eager to build up their own auto industries and provide local jobs, often leading to wasteful investment in excess capacity.

Most of them are competing against each other at the lower end of the market and leaving the lucrative upper end to the manufacturing ventures of global players, such as General Motors and Volkswagen AG.