Dong Yang, Executive Vice Chairman and Secretary-General of the China Association of Automobile Manufacturers, said to the reporter that this year's new car sales in China are expected to approach 13 million units, becoming the world's first. However, the concentration of the Chinese automobile industry is not high enough, with more than 130 whole vehicle companies, which are too dispersed.

Shanghai Securities News reported on November 11 that two state-owned central enterprises with military background - China North Industries Corporation and China Aviation Industry Corporation, signed an automobile asset restructuring agreement on the morning of the 10th. The Aviation Industry will transfer the equity of Changhe Automobile, Hafli Automobile, Dong'an Power, Changhe Suzuki, and Dong'an Mitsubishi to the Chang'an Automobile Group under the arms group. This is a strong alliance of central enterprises in the field of automobiles, which has attracted widespread attention from all sides.

Chinese automobile companies are too dispersed

Zhang Xiaoyu, Chairman of the China Society of Automotive Engineers, believes that after the reorganization, the domestic automobile market pattern will undergo significant changes. After the reorganization, the Chang'an Automobile Group will surpass Dongfeng in sales this year, ranking third; next year it is expected to surpass FAW, becoming the second; and in the following year, it is expected to become the first.

Dong Yang, Executive Vice Chairman and Secretary-General of the China Association of Automobile Manufacturers, said to the reporter that this year's new car sales in China are expected to approach 13 million units, becoming the world's first. However, the concentration of the Chinese automobile industry is not high enough, with more than 130 whole vehicle companies, which are too dispersed.

According to the statistics of the China Association of Automobile Manufacturers, in 2008, only FAW, Dongfeng, and SAIC had sales of more than one million vehicles in the domestic automobile companies. The production and sales of the top 10 automobile companies accounted for more than 80% of the total. Among more than 130 whole vehicle companies, the vast majority of companies have an annual production and sales of less than 10,000 vehicles.

In order to change the situation of the domestic automobile industry being too dispersed and to make the automobile industry bigger and stronger, the fourth of the eight goals proposed in the "Automobile Industry Adjustment and Revitalization Plan" is to make significant progress in mergers and reorganizations. Through mergers and reorganizations, 2-3 large automobile enterprise groups with production and sales scale exceeding 2 million vehicles will be formed, and 4-5 automobile enterprise groups with production and sales scale exceeding 1 million vehicles will be formed. The number of automobile enterprise groups with production and sales scale accounting for more than 90% of the market share will be reduced from the current 14 to less than 10. The "Plan" encourages large automobile enterprises such as FAW, Dongfeng, SAIC, and Chang'an to carry out mergers and reorganizations nationwide. It supports automobile enterprises such as BAIC, GAC, Chery, and Sinotruk to carry out regional mergers and reorganizations. Dong Yang pointed out that it is necessary to increase the intensity of mergers and reorganizations according to the requirements of the "Plan", and cultivate Chinese automobile giant enterprise groups. Chang'an Automobile's reorganization this time will undoubtedly accelerate this process.

Can Chang'an Automobile's reorganization be successful?

Huang Yonghe, the chief expert of the China Automotive Technology and Research Center, said to the reporter that there are both successful and unsuccessful mergers and acquisitions between automobile companies. He believes that the reorganization of Chang'an Automobile by the Aviation Automobile has a great chance of success. There are mainly four reasons:

Firstly, Chang'an, Hafli, and Changhe all belong to the central enterprises and have a military industry background, sharing many commonalities in corporate culture, which makes integration relatively easy.

Secondly, looking at the product line, all three companies started with the production of mini-cars. The three mini-car brands of Chang'an, Songhua River, and Changhe are deeply rooted in the hearts of the Chinese people. After the reorganization, it is possible to expand and strengthen the mini-car industry in the shortest possible time.

Thirdly, in terms of foreign partners, many models and technologies from both sides come from Japanese Suzuki. After the reorganization, it is possible to optimize the combination in terms of model introduction, technology introduction, and technology development.

Fourthly, after the reorganization, centralized and unified procurement can be carried out, which enhances bargaining power. This is very helpful for reducing costs and improving product competitiveness.

(The source of this article: Shanghai Securities News, Author: Heng Daoqing)