Chery and JAC to merge?

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The current economic outlook for the world is not so great, although the effects of the world stock market have yet to effect China en-masse, many automakers and house makers are starting to tighten their belts to prepare for the oncoming long, cold winter.

Many small Chinese automakers rely on the Chinese domestic market, and then the export markets (especially Africa/Middle East) for their sales, with the Chinese market turning from hot to warm to lukewarm over the past few months, it could be that many small automakers are getting ready to hit the wall. Chery and JAC are looking at the possibility of merging together according to Chinese media reports. JAC has a long history of making vans, MPVs and more recently cars. Chery on the other hand has a very short, yet sucessful history of making great cars at excellent prices, whilst managing to get design and safety issues in hand. Although rumours of a JAC-Chery partnership or merger have been rumbling around for the past two years, it seems the rumours have tumbled into something bigger over time. One person close to the matters at hand revealed that information on the possible merger have been passed onto the Anhui Provincial Secretary. JAC and Chery are considered to be Anhui’s ‘Automotive Giants’ and any potential merger would need to be rubber stamped by the government, although a merger between JAC/Chery would certainly take away Chongqing mantle of ‘Chinese Detroit’, and with ports nearby, it could mean that Anhui’s local brands have a strategic advantage over inland Chongqing，the merger could also change Anhui from a largely rural agarian based economy into an automotive powerhouse, as any automotive power is nothing without a good supply chain, there would be a rush of third party suppliers to Anhui.

The Anhui government were keen to point out, although no merger decision has taken place, there is a large possibility of it happening.

Last year, JAC sold 180,000 vehicles, where as Chery sold 388,000 vehicles. However, JAC improved its income by 20% from January to August this year but Chery was down by 10.1% over the same period. From Jan to August this year, Chery’s profit growth rate increased by 60% to achieve 71.20%, whereas JAC was down by 41.68%. During 2007 JAC’s total income from automotive sales was 1.42 billion RMB, Chery automotive sales pulled in an estimated 1.51 billion RMB

JAC’s latest sedan, the Bin Yue, is also not selling very well, with it only clearing 232 sales in August, a downfall of 17% over the previous month.