Chinese Command Consolidation

Bertel Schmitt
by Bertel Schmitt

The Chinese government had announced earlier this year that it wants to “encourage” its more than 100 automakers (nobody is quite sure how many there really are) to consolidate. The goal: Make China’s industry more competitive with foreign rivals. Beijing wants to see four big ones and four smaller ones. Unsaid: the remaining 90-odd carmakers should look for other employment.

To lead by example, the Chinese government just initiated one of the largest merger deals in the Chinese auto industry. Easy for them to do: The government owns both companies.

Changan Automobile Group Co., a Chinese auto maker belonging to the China Ordnance Equipment Group Corporation (COEGC), agreed to take over auto operations of Aviation Industry Corp of China (AVIC) to form what might be the third largest Chinese automaker after SAIC and FAW, Xinhua reports.

Changan receives from AVIC Harbin Hafei Automobile Industry Group, Changhe Automobile, Dongan Power, Changhe Suzuki and Dongan Mitsubishi.

Both Changan and AVIC are both former military enterprises, owned by the Chinese government.

AVIC is to focus on its core business, namely airplanes. AVIC makes everything from commercial airplanes to bombers, fighters, and helicopters. AVIC entered a joint venture with Airbus to make parts and components for the A350 wide-body aircraft.

Changan is the Chinese joint venture partner of Ford and Mazda. Its total sales for the first ten months grew 57 percent to 1.1m units. The restructuring will boost Changan Auto Group’s annual auto production capacity to nearly 2 million units. The restructured group aims to sell more than 2.6m vehicles by 2012, and 5m units by 2020, says Gasgoo.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href=""> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href=""> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

More by Bertel Schmitt

Join the conversation
  • PrincipalDan PrincipalDan on Nov 10, 2009

    Oh please command me. Actually I'm amazed it took the Chinese government this long to combine operations. Kind of like the fact that our government didn't try to combine GM and Chrysler. Although I would have preferred letting one die and rescuing the other. So B&B how long will it take the Chinese to get down from dozens of automakers to just a hand full?

  • Rusted Source Rusted Source on Nov 10, 2009

    Times are Changan. I know, lame.