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"Chang'an Group is reportedly moving forward with a potential reorganization involving Qingling, aiming to enhance its market position and challenge the top-tier automotive groups. According to recent news from Chang'an, the new automobile industry policy introduced in June has started to take effect, encouraging the formation of large-scale auto groups. The policy sets a threshold: a group must either hold over 15% of the domestic market share or achieve annual sales revenue exceeding 15% of the total industry sales. This change is reshaping the industry landscape, effectively removing the traditional dominance of SAIC, FAW, and Dongfeng, which had long been considered the 'first camp.' With Dongfeng failing to meet the criteria, it now faces uncertainty, while Chang'an, Beijing Automotive, and Guangzhou Automobile are seen as strong contenders for the top tier.
A source within Chang'an recently stated, "The new policy supports the development of large enterprise groups. Through cooperation with Qingling, Chang’an aims to strengthen its position and compete for a place among the first-tier companies." Earlier, Yin Jiaxu, head of Chang'an, emphasized the company's strategy: "We are following market rules, using assets as a bridge, and forming corporate alliances to move toward large-scale enterprises, striving to reach a 15% market share and enter the top tier quickly."
Despite the complementary strengths of both companies, there are challenges. Qingling, a local enterprise, and Chang'an, a central state-owned company, face difficulties in integration due to their different backgrounds. Qingling, once ranked among Chongqing’s top 50 industrial companies, is one of China’s 14 key automotive enterprises. It has total assets of RMB 12.5 billion and net assets of RMB 7 billion. Its products include light commercial vehicles, heavy trucks, and multi-purpose passenger cars based on Japanese Isuzu technology. As a Hong Kong-listed red chip company, Qingling has long attracted Chang’an’s interest.
While Chang’an is pushing forward aggressively, other major players like Beijing Automotive and Guangzhou Automobile are also making significant moves. In 2003, BAIC produced 348,000 vehicles and achieved sales revenue of 30.82 billion yuan, increasing its market share to 7.8%. BAIC aims to produce and sell 1 million units by 2008, reaching 100 billion yuan in sales. Similarly, Guangzhou Auto plans to reach 300,000 units in production and over 500 billion yuan in sales by 2005, aiming for 100 billion yuan by 2008.
Dongfeng, which fell short of the 15% market share last year, is not standing still. A spokesperson said, "We are aware of the new policy, but the final criteria—whether market share or revenue—remain unclear. We believe profitability is the real measure, and we are among the top profit-making companies in the country." While no details were given about future mergers, the company is likely considering strategic moves to regain its position.
According to the new policy, large-scale groups can implement their own development plans without excessive government intervention. Zhang Wenkui from the State Council's Development Research Center noted that this will streamline project implementation. Jia Xinguang, a senior consultant at China Automotive Industry Consulting, added that once a 5- or 10-year plan is approved, specific projects don’t need individual approvals, giving companies more autonomy.
Experts suggest that in a fiercely competitive market, companies must respond quickly to survive. For those not part of large groups, the path forward may involve alliances and restructuring to boost competitiveness. Li Zuokui from Dalian University of Finance and Economics pointed out that most domestic automakers lack the capital to reach economies of scale, so voluntary partnerships and industrialization are key.
Jia Xinguang also highlighted the potential for further integrations, such as between Changhe and Hafei, or Anhui Jianghuai and Chery. He suggested that regional players like Shenyang Brilliance Jinbei might be acquired by FAW, while Guangzhou and Dongfeng could increase their collaboration. Experts stress that government interference should be minimized, and market competition should drive the industry’s restructuring.
Source: China Business News" (596 characters)