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SCMP Reporter

Beijing-brokered 2.1b yuan deal boosts competitive ability
Shanghai Automotive Industry Corp (Group),  the country's biggest car firm, will buy the vehicle production  business of  Nanjing Automobile (Group) Corp, the first big  tie-up between two mainland carmakers.
The deal was brokered by Beijing, which has encouraged carmakers to consolidate  to boost their ability to compete with overseas competitors such as Volkswagen and Toyota Motor Corp. China has about 150 vehicle firms,  mostly  small-scale and with low output.
'This tie-up should be the beginning of something big, with more mergers to come,' said Yu Wei, a vehicle  analyst with  Wanguo Stock Consulting.
Mr Yu  said the partnership between SAIC and Nanjing Auto consolidated carmakers in the Yangtze River Delta. The next wave of mergers would probably involve First Auto Works in the  northeast and Dongfeng Motors in the west and south.
SAIC, FAW and Dongfeng Motors account for almost 50 per cent of cars sales on the mainland.
In yesterday's deal, which took about eight months to reach, SAIC agreed to pay 2.095 billion yuan to Nanjing Auto's parent, Yuejin Motor, to buy its vehicle-assembly and component-making businesses.
In return, Yuejin would receive 320 million shares, or almost  5 per cent, of Shanghai-listed SAIC Motor Corp.
SAIC has proved a top car  manufacturer but lags behind in  van production. By acquiring Nanjing Auto's vehicle  assets, especially its Iveco minivan production line, the  company will be able to expand into the profitable commercial vehicle sector.
The merger will also help the companies avoid cut-throat competition for sales of MG Rover vehicles, which both companies sell under different names in China.
SAIC bought the technology and design rights to the Rover 25 and the Rover 75 in 2004 for US$136.55 million while Nanjing Auto took over MG Rover's assets and brands for US$87 million in 2005.
'They can make big savings by collectively buying  parts and sharing research and marketing resources,'  Mr Yu said. 'At least they don't have  to tell customers that the seemingly identical products are different.'
Nanjing Auto chairman Wang Haoling also confirmed yesterday that his company had ended a nine-year partnership with Fiat by buying out the Italian company's 50 per cent share in a joint venture.
Fiat, after repeatedly expressing dissatisfaction with the partnership, will establish a joint venture with Chery Automobile, the mainland's fourth-biggest carmaker, to produce and distribute Fiat brand cars.
Mr Wang said co-operation with Fiat on its Iveco vehicles and vehicle  parts would continue.
SAIC's profits more than tripled in the first three quarters of the year, but the  Nanjing Auto buyout was not likely to affect the  company's share price, SAIC chairman Hu Maoyuan said.
Nanjing Auto's sales fell 8.77 per cent in the first 11 months  while the industry grew  23 per cent on average.
Trading in SAIC shares was suspended yesterday. The stock climbed 2.7 per cent to 27.01 yuan on Tuesday.
Mileposts
1 SAIC Motor pays 2.1b yuan for Nanjing Auto's vehicle-assembly and component businesses
2 Nanjing Auto to own 320m SAIC Motor shares
3 Combined sales to exceed 2m vehicles by 2010
4 Nanjing Auto sold 86,505 vehicles from January to November
5 SAIC (Group) sold 1.34m vehicles in 2006



SAIC and Nanjing Auto forge landmark tie-up