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Kandy Wong

Two big state-owned military suppliers, Chongqing Changan Automobile and Aviation Industry Corp (Avic), yesterday agreed to restructure their vehicle units, part of a government-backed consolidation of the nation's fragmented car industry.
According to a statement by Shenzhen-listed Changan Automobile, it will gain stakes in ventures with Suzuki Motor and Mitsubishi Motors, which Avic held previously. In addition, it will get Avic-owned domestic brands such as Hafei Automobile, which makes minivans, and Changhe Automobile.
In return, aircraft maker Avic will get a 23 per cent stake in Changan Automobile from the carmaker's parent China South Corp.
According to Xinhua, the total net asset value of Changan Automobile would reach 71.5 billion yuan (HK$81.2 billion) after the merger.
Changan Automobile and Avic had combined vehicle sales of 1.53 million units in the first 10 months, which surpassed No 3 vehicle maker Dongfeng Motor in Hubei. However, no specific figures were given.
Dongfeng had been involved in discussions with Avic to acquire Hafei Automobile and Changhe Automobile previously. But the talks failed as the parties could not reach an agreement on the shareholding structure of the joint venture.
Changan Automobile said in its statement the restructuring still needed government approval.
Early this year, the State Council sent an internal document to local carmakers calling for a consolidation of the 10  key firms, led by the Big Four, and four medium-sized companies. 
The Big Four reportedly are Shanghai's SAIC Motor Corp, Jilin's First Auto Work Group, Dongfeng and Changan Automobile, which are expected to reach yearly sales of two million units each.
The medium-sized carmakers are Guangzhou Automobile Industry Corp, Anhui's Chery Automobile, Beijing Automobile Industry Corp and Shandong's China National Heavy Duty Truck.
Changan Automobile and Avic's restructuring is the second this year in the industry.  
Guangzhou Automobile acquired Hunan's sport-utility maker Changfeng Automobile in May for one billion yuan with the support of the National Development and Reform Commission and local governments.
'Total vehicle sales in China could reach 13 million units this year, making it the world's biggest car market,' said Dong Yang, the general secretary of the China Association of Automobile Manufacturer. 
'But the industry has more than 130 carmakers at present, which is not concentrated enough.'
Most of the nation's carmakers are small regional companies controlled by local governments concerned mainly with creating jobs.
In December 2007, SAIC took the lead to merge with the defunct Nanjing Automotive Group for two billion yuan.
Encouraged by the consolidation news, Hong Kong-listed car stocks shot up yesterday. Qingling Motors surged 32.02 per cent to HK$2.35; Brilliance China increased 14.95 per cent to HK$2.46 and Geely Automobile Holdings closed 7.56 per cent higher at HK$3.13.
Shifting gear
The restructure will give aircraft maker Avic a holding in Changan Automobile of: 23%



Changan Auto to get Avic unit stakes in shake-up