Local and central governments in China want Shanghai Auto and Nanjing to be linked into a comprehensive automaker that can compete with established foreign-owned giants in both domestic and export markets, industry sources and analysts have said.
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“Shanghai Auto is number one in the domestic passenger car market. A tie-up would shore up its commercial vehicle segment and boost its overall competitiveness,” Zhang Xin, senior industry analyst with Guotai Junan Securities, told Reuters.
Last weekend Nanjing Automobile said it had agreed with Shanghai Automotive Industries (SAIC) a “comprehensive cooperation” on design, production and sales.
A news agency report noted that the announcement said they were looking at an asset swap but made no mention of whether they were discussing an outright merger.
Nanjing Automobile Corporation (UK) said: “The two companies share a common vision to jointly build an automotive group that will become the largest, world class automotive group in China with the resources to develop a highly effective global development strategy.
“In order to effectively integrate and make the best use of the joint resources of the two companies, there will be a carefully devised strategic cooperation on passenger cars, commercial vehicles and independent brands, as well as automotive parts and component manufacturing.”
Reuters said the announcement may indicate that China’s government, after years of policy declarations but little success, is stepping up efforts to force consolidation of China’s fragmented auto industry, crowded with more than 100 players, and noted that Beijing officials have said they want to see an industry which centres around three or four auto groups that have the resources and technology to succeed globally.
“We have just expressed our willingness to cooperate with Nanjing Auto,” an unnamed Shanghai Auto executive told Reuters, adding: “What kind of agreement we would reach and whether it involves any equity transaction remain to be seen.”
