China Aviation Group to boost auto-making business

Shanghai, June 24 (Gasgoo.com) China Aviation Industry Corporation I (AVIC I) and China Aviation Industry Corporation II (AVIC II) will be merged to form a new China Aviation Industry Group Corporation, and one of its top priorities is to expand its auto business. Dongfeng Motor's investment in AVIC II's subsidiary Hafei Auto is put on the table again. 

Currently, AVIC II has three auto-making subsidiaries (Hafei Auto, Changhe Auto, Shaanxi Hanjiang Auto) and two engine manufacturers (Harbin Dongan Auto Engine Co., Ltd., Harbin Dongan Engine Manufacturing Corp. which is a joint venture with Mitsubishi); the auto businesses of AVIC I include the Silver Bus, Jincheng Motorcycle and Chengfei Auto Die.

The new group will not give up the automobile businesses of both the current corporations, because these businesses will be closely related to the new group's future interest. "To maximize the benefits of the group is one of the prerequisites for our decision to expand the auto-making business," said an official of the preparatory committee of the group. The group will integrate all the auto businesses of the two corporations to build up a competitive auto-making giant in China's auto industry.

The founding of the new China Aviation Industry Group Corporation will further delay Dongfeng Motor's plan to invest in Hafei Auto. In June 2007, French carmaker PSA Peugeot-Citroen and Hafei signed a memo to build a 50-50 joint venture for making small cars at Hafei's Shenzhen plant for China market. But China's regulator has required PSA to tie up with Hafei through PSA's big Chinese partner Dongfeng Motor. The investment talks have undergone ups and downs for one year, but no result has come on the horizon yet.

The widespread rumor that Jiangxi Changhe Auto would be acquired by China's auto-making giants such as Beijing Auto or Changan Auto was also spiked last month by Changhe Auto's general manager, who said the company will become an important automaking part of the new China Aviation Industry Group Corporation.