Concentration of automotive industry targeting 90% of qualified companies

If ten years ago, "Tianyi Cooperation" and even five years ago, "Shangnan Cooperation" was initiated by the government "pushing hands" to open up the merger and reorganization of the auto industry, then Guangzhou Automobile's integration of Changfeng and GAC acquired Gee around 2010. As well as the merger and reorganization of Changan’s merger with AVIC Automotive, it has pushed the industry consolidation to an unprecedented height.

With the recent re-integration of the New Deal by the government, the merger and reorganization of the auto industry will enter the depth stage.

Concentration continues to increase

Last week, ministries and commissions such as the Ministry of Industry and Information Technology and the National Development and Reform Commission jointly issued the Guiding Opinions on Accelerating the Promotion of Mergers and Acquisitions in Key Industries (hereinafter referred to as the “Guiding Opinions”). It is hoped that by 2015, the industry concentration of the top 10 auto companies in the auto industry will reach 90. %, and form 3 to 5 large-scale automobile enterprise groups with core competitiveness.

Different from previous policies, the New Deal does not regard the scale of production and sales as an important standard for companies to achieve compliance, but aims to guide auto companies to enhance their core competitiveness. The "Guidance Opinions" stated that the entire vehicle company will be promoted through mergers and acquisitions to integrate key resources, optimize product lines, reduce operating costs, increase capacity utilization, and promote the development of independent brands; it will support key components companies to expand their scale through mergers and acquisitions. Vehicle manufacturers establish long-term strategic partnerships.

In addition to domestic mergers and acquisitions, the government will also support domestic auto companies to “go global” and seize the opportunity to conduct cross-border mergers and acquisitions, optimize resource allocation globally, and enhance international competitiveness. At the same time, the government will support large-scale automobile companies to extend their service areas through mergers and acquisitions, and realize the integration of services and manufacturing.

The industry believes that if only from the digital perspective, the implementation of the New Deal is not difficult. "The market share of the top ten vehicle manufacturers in the past year has reached 87.3%, and this year's concentration will definitely continue to increase this year," said Cui Dongshu, deputy secretary-general of the National Passenger Vehicles Association.

Especially in the current sharp decline in the economic benefits of the entire automotive industry, the industry consolidation process will accelerate. Statistics from the China Association of Automobile Manufacturers show that from January to November 2012, the total industrial output value and operating income of 17 key enterprises (groups) only increased by 4.4% and 3.5% respectively over the same period of last year, and the growth rate fell by 1 compared with the same period of 20111 Percentage point and 6.1 percentage points; total profits and taxes realized increased by 5.8% over the same period of last year, and the growth rate dropped by 7 percentage points over the same period of last year.

In the "Auto Industry Adjustment and Revitalization Plan" promulgated three years ago, it was proposed to form "Four Big" (Shangqi, FAW, Dongfeng and Changan) "Four Small" (Beiqi, Guangzhou Automobile, Chery and China Heavy Duty Truck) through merger and reorganization. Industrial structure, however, the structural problems of the auto industry are still outstanding.

According to the data from the Ministry of Industry and Information Technology, the Chinese automobile industry is characterized by small, weak and scattered industries. There are more than 1,300 vehicle manufacturers of various types in the country, of which 171 are automotive vehicle companies, 120 are motorcycles, and 900 are special-purpose vehicles. 135 cars and low-speed trucks. Among these 1,000 companies, a number of companies have been in production or semi-discontinued state for many years. The output is very low or even without output, and survival is very difficult.

It is worth mentioning that some mergers and reorganizations that have been completed before have not achieved the desired results. After the acquisition of Hafei and Changhe by Changan Automobile, the specific integration work has encountered frequent resistance, and the enterprises have remained in their own hands. The integration of resources and upgrading of technology have been very limited.

Compared with Changan Automobile's restructuring case, GAC's mergers and acquisitions in recent years have been widely recognized by the industry due to its greater reliance on market mechanisms. GAC restructured Changfeng Automobile to restructure through the capital market. The case of GAC GIO opened the precedent for SOEs to restructure private enterprises. Last year, GAC completed a strategic alliance with Chery again.

People in the industry believe that after the introduction of the New Deal, the auto industry is expected to set off a new round of reshuffling, and some automakers with production qualifications will be eyeing the big group. The reorganization of Dongfeng and Fuqijian on the string is expected by the automotive industry. This will be the first reorganization of the local automobile groups by major central auto companies. Including Jianghuai, Jiangling, even Huatai, ZTE, Zhongtai and other small-scale automobile companies, may face difficulties in the future competition, or will become a new goal of mergers.

Local interests are difficult to deal with

Under the current system, the biggest difficulty in the merger and reorganization of the automobile industry lies in the difficulty in balancing the interests of local authorities. Because investment in the automotive industry contributes to local GDP growth, with high output value and high taxation, local governments often hope to promote output value, taxation, and employment growth through the development of the local automobile industry, thereby achieving better performance in government performance appraisal. Achievements.

This means that whether car manufacturers can stay locally is crucial for taxation. As a result, local governments have set up barriers to cross-regional restructuring of the automotive industry through various means.

In the process of reorganizing Changhe and Hafei, Chang’an failed to better drive the development of the automotive industry in Changhe, which caused Chang’an’s integration of its resources to be affected.

The reason why Guangzhou Automobile is relatively smooth is because it reorganized Changfeng Automobile and introduced two new joint ventures, namely GAC Fiat and GAC Mitsubishi, to Changsha. This has led to the development of the local automobile industry chain, which has allowed GAC to successfully expand through the merger and reorganization.

It is precisely because of this ambiguity that the merger and restructuring policy of three years ago did not achieve the desired results. The "big four" and "four small" have not only failed to grow their businesses through mergers and acquisitions, but have faced cruel market trials as the external environment has changed.

Enterprises gradually explored new ways of cooperation. The “four small” alliance of GAC and Chery emerged as the times require. This cooperation does not involve the level of equity and capital, but only two independent automotive companies carry out normal cooperation at the technology and R&D level.