China's auto industry association expresses doubts on government-backed mergers

Shanghai. February 14 (Gasgoo.com) – China’s automobile industry experiences a string of government-backed mergers last year and is expecting more mergers in years ahead. However, China’s National Association of Passenger Vehicle Manufacturers expresses a skeptical view in a report on the recent wave of government-backed mergers in automobile industry.

 

Unfortunately, most mergers and acquisitions have finally ended up in failures, the Association’s report said. The report cited two examples to make its case: Mercedes-Benz finally got rid of Chrysler many years after it acquired Chrysler and BMW finally sold out Rover at one British Pound though it spent 3 billion euros purchasing the automaker.

 

Last year, Shanghai Automotive Industry Corporation acquired Nanjing Auto and Dongfeng Motor is in talks with Hafei Group for a possible tie-up.

 

"These are typical government-backed mergers,” the report said. “It takes at least five years for us to conclude whether or not these government-back mergers are successful.”

 

As Chinese auto industry is booming, it still lacks competitiveness in international marketplaces. Analysts say mergers between major automakers help pool resources. Clearly Chinese government encourages mergers between Chinese auto-makers in order to increase their capability to compete in the international markets.