China's Shanghai Auto buys rival Nanjing Auto

Shanghai Automotive Industrial Corporation, China’s largest carmaker, is to take over the vehicle assembly and parts operations of rival Nanjing Automobile in a move officials intend will create an internationally competitive national champion.

Under the deal, SAIC’s Shanghai-listed unit SAIC Motor will pay Rmb2.1bn ($286m) for the core operations of Nanjing Auto, which include the British MG brand. Nanjing Auto’s parent will also get a stake of just under 5 per cent in SAIC Motor.

GM plans China ‘green’ research plant - Oct-30Chrysler’s China plan hits snag - Oct-25The car market: In need of economies of scale - Oct-09The long-discussed acquisition brought to an end Nanjing Auto’s disappointing carmaking joint venture with Fiat, with the Italian group selling its 50 per cent stake but planning to continue co-operation on commercial vehicles and ­components.

SAIC, which runs major joint ventures with Volks­wagen of Germany and ­General Motors of the US as well as producing its own vehicles, has long been seen as unenthusiastic about the idea of acquiring the much smaller and financially weaker Nanjing Auto. However, the deal offers some obvious synergies: the two companies bought different parts of the UK’s Rover when it went bankrupt and sell almost identical versions of the old Rover 75 under rival MG and Roewe brands.

Company officials said the deal met government calls for consolidation in China’s overcrowded motor industry and would give SAIC Motor the scale to compete ­inter­nationally.

“Today, a great aircraft carrier fleet is raising its sails and setting forth,” said Wang Haoliang, chairman of Nanjing Auto’s parent, the Yuejin Group.

Company officials said further cost savings would be generated by “unifying” procurement, sales and production operations.

“From the point of view of profitability ... there will of course be some effect, but that will not be too big and will be temporary,” said Hu Maoyuan, chairman of SAIC Motor.

SAIC Motor said it would combine all Nanjing Auto’s units with its own, but would continue to make full use of both brands and of the smaller company’s MG operations in the UK.

“The British business will become a new platform for SAIC’s overseas operations. From now it will be a ­window for SAIC in Europe,” said Chen Hong, SAIC Motor president.

Beijing, which sees the development of a domestic motor sector as a key industrial policy goal, has long pushed for consolidation among China’s many – often small – car companies in order to establish a small number with sustainable business models.

As part of the deal, SAIC and Yuejin will also set up a joint venture to control Nanjing Auto’s component parts, services and trade businesses, the companies said.

Global demand fuels Japanese cars

Toyota and Honda, Japan’s two largest carmakers, raised output in November on higher overseas demand.

Toyota built 803,663 cars and light trucks, up 9.2 per cent from a year earlier. Honda’s output rose 10 per cent to 363,046.

Japanese carmakers boosted production overseas to counter the effect of currency fluctuations and to tap rising demand in emerging markets. Toyota opened a factory in St Petersburg, Russia, last week.

Nissan, the third-largest carmaker, increased global production by 15 per cent to 335,088 last month. It will also open a factory near St Petersburg in 2009.

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