Chinese Auto Makers Could Merge

26 February 2009

BEIJING: China's government may encourage the country's two biggest auto makers, SAIC Motor Corp and the FAW Group, to buy up smaller rivals in an effort to restore the country's automotive sector to growth.

Bloomberg reports that the Chinese government is interested in consolidating the country's 14 biggest auto manufacturers into ten companies to secure the long-term future of the market.

This means that other major manufacturers like Dongfeng Motor Corp and Changan Automobile will also be allowed to buy up smaller firms from across the country.

Some smaller auto makers, including Chery and the China National Heavy Duty Truck Company, will also be able to make purchases on a regional level.

Vehicle sales increased by 6.7% in China last year to 9.4 million, according to figures from the China Association of Automobile Manufacturers, though this growth figure was the lowest for a decade.

The aim of the consolidation plan is to return the market to double-digit growth, with Ricon Xia, an analyst at Daiwa Associate Holdings, arguing this strategy will "nurture a few automakers that will be stronger to compete with overseas rivals."

Data sourced from Bloomberg; additional content by WARC staff