SAIC intends to participate in the share of Shang Chai: It will be clear within 3 months

SAIC Group is currently in discussions with Shanghai Diesel Engine Co., Ltd. (600841.SH), exploring potential collaboration opportunities. As the key player in the acquisition of Nanjing Automobile Group, SAIC's move aims to strengthen its position in the commercial vehicle sector by addressing a critical gap in engine supply. A representative from Shanghai Shangchai Securities confirmed the talks to reporters, stating that this is a strategic partnership between the two companies and that an official announcement is expected within three months. However, sources from both sides have indicated that the discussions are still in their early stages, with no concrete details yet on how they will collaborate or share ownership. According to an insider at SAIC Group, the current phase involves preliminary business cooperation discussions, and no final decision has been made. Meanwhile, the parent company of Shangchai, Shanghai Electric, has already deployed a working group to oversee the company’s shares. Shangchai is a leading manufacturer in China’s internal combustion engine industry, known for its comprehensive product range, including five major series and over 300 variants. The two companies first connected in 2002, but previous attempts at collaboration failed due to disagreements over control and bidding processes. In 2006, Shangchai also sought a partnership with Caterpillar, but the talks eventually fell through. Industry experts suggest that while Shangchai has strong R&D capabilities, it lacks integration with downstream industries, limiting its market growth. As OEMs increasingly build their own engine systems or partner with other suppliers, Shangchai faces growing challenges. Beiqi Futian, once a major client, has shifted its engine procurement toward Daimler-Benz, highlighting the changing dynamics in the industry. Since 2005, Shangchai’s growth has slowed, with its Q1 2007 report showing revenue of about RMB 8.1 billion and a profit of only RMB 2.01 million—a 47% drop from the same period the previous year. For SAIC, the collaboration with Shangchai could help address a key weakness: the lack of diesel engines for its commercial vehicles. While SAIC has made strides in passenger cars, its commercial vehicle segment remains underdeveloped, especially in heavy trucks and light commercial vehicles. As part of its “Eleventh Five-Year Plan,” SAIC aims to expand both its passenger and commercial vehicle businesses. The company has already taken steps to consolidate its commercial vehicle operations, including establishing a new division and acquiring stakes in several companies. Analysts believe that for SAIC to succeed in the medium- and heavy-duty truck markets, it must secure reliable engine suppliers. Currently, only a few domestic manufacturers, such as Weichai, Dongfeng Cummins, and Shangchai, can produce high-powered engines. Therefore, a partnership with Shangchai would provide essential support for SAIC’s future commercial vehicle initiatives.

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