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  • Jul 25, 2014
  • Updated: 7:46am
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CARS

Mainland carmakers Guangzhou Auto and Chery in bid to beat slow market

Guangzhou Auto and Chery agree to share core technology and management experience

PUBLISHED : Wednesday, 07 November, 2012, 12:00am
UPDATED : Wednesday, 07 November, 2012, 3:36am

Guangzhou Automobile Group, the Chinese partner of Japan's Toyota Motor and Honda Motor, formed an alliance with fellow mainland firm Chery Automobile yesterday to share core technology and management experience in an attempt to boost competitiveness in a slowing market.

The deal is the first of its kind between two mainland carmakers in the world's largest car market that is still dominated by foreign brands.

Under the agreement, the two companies will work together on vehicle development and share engine and key component technology. They will also co-operate in energy-saving and new-energy vehicle development, international business as well as manufacturing and management processes. The deal does not involve equity stakes.

"The Chinese economy has slowed down this year and the market demand has been weak. This has pressured us to upgrade our business structure and seek sustainable growth," Zhang Fangyou, the chairman of Guangzhou Auto, said.

Guangzhou Auto, the sixth-largest car manufacturer in the country, has been hit hard this year by sluggish sales and anti-Japanese sentiment caused by a territorial dispute over the Diaoyu Islands in the East China Sea.

The sales of Guangzhou-made Toyota and Honda vehicles, which contributed 94 per cent of the company's profits last year, fell 40 per cent and 54 per cent respectively in September, according to industry statistics.

Guangzhou Auto is trying hard to boost its own brand Trumpchi. It has launched a sedan and a sport utility vehicle under the brand since 2010. It plans to sell them in Europe next year.

"It will definitely be better to work with a brother company rather than a foreign player," said Wu Song, a vice-general manager of the company.

"You will never get the core technology by co-operating with foreign companies."

Chery is the largest manufacturer of self-owned car brands and the nation's largest vehicle exporter. It is seeking to take advantage of its new partner's production and management experience to move from the lower to the higher end of the market.

Earlier this month, Chery said it had obtained the approval to set up a joint venture with luxury sedan and SUV maker Jaguar Land Rover.

Meanwhile, counting the cost of anti-Japanese protests, Nissan Motor cut its full-year net profit forecast by 20 per cent to US$3.99 billion and said it had lost share in its biggest market.

Additional reporting by Reuters

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