New policies to coerce automakers into merging
In the past few years the Chinese government have been eager to slim down their burgeoning car industry which is now the worlds largest in terms of sales, and automakers. Chinese automakers currently number around 130, an impressive number for a developing country. The largest domestic manufacturers, FAW, Dongfeng, SAIC, and Chang’an are considered the top tier of automakers, whilst Beijing Auto, Guangzhou Auto, Geely, Chery and the truck maker Sinotruck form the second tier which are seeing the largest growth so far.
The government is eager to see the larger tier one automakers take over the second tier and smaller third tier automakers. In 2008 SAIC took over its regional rival, Nanjing Autos, in a bid to consolidate its purchase of the failed Rover group. Late in 2009, Chang’an took over the AVIC group of automakers, which basically saw the successful Chang’an take over the two car companies Changhe and Hafei, both of which were suffering from stunted growth in a massive market.
2009 was being bailed as the year that the Chinese would take over automotive production as the West knows it, with the rumor mill going into overdrive with Shanghai GM buying out American GM scandals. Some Chinese buy-outs of Western companies have come to pass, notably the Geely-Volvo acquisition and also the BAIC-Saab technology transfer, of course the Hummer take over has yet to be formally announced as it is lacking government approval from both sides.
China is planning to award big tax breaks to companies that do merge, or take over smaller rival companies. Such a move would no doubt boost the already booming Chinese car industry and would take out a lot of competition but also give larger manufacturers extra production capacity at the same time. All of the Tier one manufacturers are eager to start their own brands or already have their own successful sub brands, the tier two manufacturers have their own brands which are small, or they have plans to build them. The government is also planning to force Chinese automakers to sell at least 20% of their product overseas, which will only further boost the Chinese car industry.
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So how will this eventually shake out?
Will Beiqi absorb Dadi, Shuanghuan, Xinkai, Tianma, and Jincheng? Will Chang’an absorb Jiangling, Lifan,Yema and Qingling?
Will SAIC absorb Soueast, Great Wall and Zhongxing?
Will FAW absorb Brilliance, Huatai and Shuguang?
Will Guangqi absorb Changfeng, Gonow and Fudi?
Will Geely absorb BYD and Zotye/Jiangnan?
Will Dongfeng absorb Chery and JAC?
I don’t think any serious consolidation will take place until the industry encounters a crisis in the market. Then many of the above will not be absorbed, but will fade into oblivion like Morris Minor and Studebaker.
And what will become of the foreign makers? After the consolidation will they ever get their wish of becoming wholly owned? Or as the big six grow their independence, and greater nationalism takes hold, will they pick up and go home?
130 automakers lol.
@ mememe
> 130 automakers lol.
This is why Chinese auto market of today is similar to US auto market of 1920s, and unlike Japanese and Korean auto markets.
Accordingly, you can expect Chinese auto industry to follow the footsteps of US auto industry, not Japanese and Korean auto industries.
Amazingly there are probably 130 alone that are making
SmartFortwo lookalikes with EV powertrains.
I think there is only one, but 130 traders selling the same product from that factory.
Here’s a short list for starters:
Shuanghuan
Huoyun
Lujun
Suzhou CMEC
Shanghai Tandem
Xin Ming (bodies)
Pioneer
Baoya
Jiangsu DHBLC
Electrovaya
Farspeed
HH, This is why the government is merging the automakers. Open up your eyes and SEE what’s around you for once. For the creativity post, the Chinese does not lack any creativity, just because the 12 workers you hired aren’t creative (in your eyes), which could be for a number of reasons, doesn’t mean all Chinese aren’t.
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