Blind expansion should be avoided

Most of the mergers carried out in China's auto industry are targeted at increasing output and sales. But in a few, profitability has been mentioned.

Experts say if mergers and acquisitions (M&A) are only aimed at boosting output and sales, they might lead to blind expansion that would eventually hurt auto makers. There had been many similar cases in the international market. Taking General Motors as an example, the company acquired a number of rivals, such as Saab and Hummer.

Those acquisitions increased its production capacity. However, the huge cost finally forced the company into bankruptcy and to apply for a bailout. Experts also suggest Chinese auto manufacturers pay more attention to enhancing global competitiveness, rather than just relying on the domestic market.

Dong Yang, Vice chairman of China Association of Auto Manufacturers, said, "When the output increases, profitability should also be improved. But whether profitability can follow the steps of output depends on the operation of the company."

Zhang Xiaoyu, Executive Vice Chairman of China Machinery Industry Federation, said, "Consolidation is a fundamental rule in the development of the auto industry, and the M&A is a method to achieve this target. For the consolidation, it's not a case of 'the larger, the better.'

The eventual value for the procedure should be measured by international competitiveness. It's not just competitiveness within one country or region."