Beijing Auto may buy Changfeng Motors for expansion

Shanghai, May 22 (Gasgoo.com) Beijing Automotive Industry Holding Co., Ltd. aims to expand its annual production capacity to 2 million units by 2010, and is set to achieve this expansion goal by mergers and acquisitions (M&A) to fill the yawning capacity gap. An industry insider said the subject of Beijing Auto's immediate M&A may be Hunan-based Changfeng Motors.

Beijing Auto is expected to produce and sell only 1 million vehicles and has difficulty in doubling its capacity to 2 million units in 2010. In the coming two years, Beijing Hyundai will have an annual capacity of 600,000 units, Beiqi Foton will boost its capacity to 800,000 units from the current 600,000 units, and Beijing Benz will maintain its current 100,000-vehicle capacity. In addition, the Beijing Auto's southern manufacturing base under construction in Hunan province will have a capacity of 200,000. These combined together, the 2 million-unit capacity goal still has a long way to go.

However, Beijing Auto has decided to fill in this capacity gap by merging and acquiring other medium-size Chinese automakers, and Hunan Changfeng Motor is said to be an ideal choice, because Beijing Auto is building a facility in the province, and Beiqi Foton has already kicked off the operation of its manufacturing facility in the provincial capital city of Changsha. More importantly, Changfeng Motors, whose capacity is just enough to fill the gap, has expressed its willingness to cooperate with Beijing Auto.

The two carmakers located in the northern and southern parts of China both have the experience of making Mitsubishi-technology SUVs and their current different techniques can complement each other. If they are merged, Beijing Auto is likely to expand its capacity enough to join the ranks of SAIC and FAW as one of China's auto-making giants.