By Jiang Fan
Different from the international auto industry, which is dominated by 9 big multinational companies, there are more than 100 vehicle manufacturers flourishing in China. Having had 9-successive-year double-digit growth, the competition pattern of China's auto industry has been changing quietly. "Small investment, small scale", being the long-term puzzle of auto industry, has got evident improvement, and the scale economy of auto industry begins to emerge.
Enterprise reorganization that deserves the greatest concern in 2007 should be the cooperation between Shanghai Automotive Industry Corporation (Group) (SAIC Motor for short) and Yuejin Motor Group. According to the agreement, auto business of Yuejin Motor Group will be integrated into Shanghai Automotive Industry Corporation (Group). Thereinto, the assets of complete vehicle and tight spare parts shall be integrated into SAIC Motor, a holding company of Shanghai Automotive Industry Corporation (Group) Group; Other parts and service trade shall be integrated into Donghua Automotive Co., Ltd, a holding company jointly set up by Shanghai Automotive Industry Corporation (Group) and Yuejin Motor Group. SAIC Motor will buy the complete vehicle and tight spare part assets of Yuejin with RMB2.095 billion yuan, and Yuejin will hold 0.32 billion shares of SAIC Motor and 25 percent equity of Donghua Automotive Co., Ltd.
No matter in the scale or the influence, the all-round cooperation of Shanghai Automotive Industry Corporation (Group) and Yuejin Motor Group will have a profound influence on China's auto industry. Shanghai Automotive Industry Corporation (Group) is an auto group with the biggest sales volume in China, accomplishing sales volume of over 1.55 million in 2007. It is also the controlling shareholder of SAIC Group Co., Ltd, the biggest listed complete-car company of China. Yuejin Motor Group is an auto enterprise with over 50 years' history. Nanjing Automobile (Group) Corporation, jointly established by Yuejin, China Huarong Asset Management Corporation, is a super large backbone auto enterprise of China with the annual production capacity of 200 thousand. The cooperation between these two enterprises has not only consolidated the leading position of Shanghai Automotive Industry Corporation (Group), but will also rewrite the record scale of China's auto enterprises.
Auto industry concerns scale economy, the expansion of production scale will lead to lower purchase and manufacturing cost, and will improve the market competitiveness of auto enterprises directly. Multinational companies in the leading position like Toyota and GM both had a production and sales volume of over 9 million in 2007. Volkswagen, having entered into China market for several years, achieved 6.189 million's global sale. A report shows that, according to the status quo of international auto market, auto companies with annual output and sales less than 1 million couldn't exist alone, and those less than 2 million are in the face of reorganization. Therefore, the main topic of China's auto industry is how to be larger and stronger. As far as sales volume is concerned, after collaborating with Yuejin, the sales volume of Shanghai Automotive Industry Corporation (Group) was close to 1.8 million, and the target of over 2 million should come true very soon. The current sales volume of No.10 auto enterprise in the world is 2.3 million. If the steady growth could be maintained, Shanghai Automotive Industry Corporation (Group) then will be expected to hit the world top ten in future few years. This will actively push forward the position of China's auto industry throughout the world, and will play a demonstration role in the reorganization and cooperation of domestic auto enterprises.
In terms of the mode of cooperation, such cooperation is an "all-round one". Wang Haoliang, Board Chairman of Nanjing Automobile (Group), said that through the comprehensive cooperation with Shanghai Automotive Industry Corporation (Group), Nanjing Automobile's fund trouble had been solved and shareholders' interest had also been protected. It is said that Nanjing Automobile will get more funds after the cooperation. According to the scheme, the production-base scale of Nanjing Automobile will become triple in the year of 2010.
At the same time, the comprehensive cooperation between Shanghai Automotive Industry Corporation (Group) and Yuejin will make the development of self-owned brands more smoothly. Shanghai Automotive Industry Corporation (Group) and Nanjing Automobile both have selected to integrate and utilize international resource and build self-owned brands at a high starting point, and both have participated in the bidding of buying Land Rover UK. Shanghai Automotive Industry Corporation (Group) finally bought the intellectual property rights of Rover's 25, 75 series cars and all-series engines, Nanjing Automobile purchased MG Rover and power assembly. In 2007, Shanghai Automotive Industry Corporation (Group) and Nanjing Automobile launched Roewe and MG respectively. Such two vehicle types have the same blood. Except for market competition pressure, they also have disputes on IPRs, causing adverse impact on the follow-up development of self-owned brands. Under such a background, collaboration is obviously better than competition. What's more important, the cooperation of the two companies will have a direct drive on the technology progress of high and medium level cars of China, and will be a good guidance and demonstration for improving the brand image and international competitiveness of self-owned brands.
Right at the same time with the successful cooperation between Shanghai Automotive Industry Corporation (Group) and Yuejin, news about the cooperation between Dongfeng Motor Corporation and Hafei Automobile Group came out. The collaboration of Dongfeng and Hafei caught people's eyes because in June 2007, Hafei signed a memorandum of understanding to initiate a feasibility study on a joint venture with Peugeot Citroen, a car partner of Dongfeng. The cooperation of Hafei and Peugeot Citroen became a pending case because of the intervention of Dongfeng, and the relationship between Dongfeng and Peugeot Citroen also turned to be complicated and confusing. Dongfeng Peugeot Citroen Automobile Company, a joint venture set up by Dongfeng and Peugeot Citroen has had 15 years' history; its performance has been wandering in the middle and downstream level. During the 15 years, news about Peugeot Citroen's seeking for new partner never stopped. Therefore, if the cooperation of Dongfeng and Hafei come true, the scale of Dongfeng could be larger, the shortage of Dongfeng in independent car development could be made up, and Peugeot Citroen could pay attention to the cooperation with Dongfeng. But nobody could talk about the result other than just wait.
It can be seen that after the large-scale reorganization tide in the middle and late 1990s and in the first 5 years of the 21st century, the competition pattern of China's auto industry is still changing. The industry is brewing a new round of cooperation and reorganization actively.
