China’s notoriously fragmented car industry, which has more than 70 registered carmakers yet is dominated by foreign companies, could be changing.
Chinese media reports said the deal involves sharing engines and platforms but does not involve equity stakes or the joint ventures both have with foreign carmakers.
Although Beijing has been pushing its car industry for years to consolidate to improve competitiveness, there has been resistance as year on year sales growth has continued. There has also been resistance from regional governments, many of whom have a stake in local car companies, because they fear jobs would be lost.
Although there have been small mergers and takeovers in the past, there have been few collaborative agreements.
“Consolidation is the way to go for China, but it is a time-consuming process because it involves various stakeholders, including provincial and municipal governments,” said John Zeng, a Shanghai-based analyst for research firm LMC Automotive.