China's largest car merger and acquisition case falls to Changan to challenge Wuling's status as a microcar


Yesterday, the China Armed Forces Group and AVIC Corporation held a signing ceremony in the Great Hall of the People. The two military industry groups formally reorganized Changan Automobile. This is the largest strategic restructuring among the central enterprises in the automotive sector.

The Changan Group, which has incorporated Changhe and Hafei, will quickly narrow the gap with SAIC-GM-Wuling, the minivan leader. Yesterday, the competitors SAIC-GM-Wuling and the foreign shareholder GM China unanimously stated that they welcome the reorganization of Changan, because there will be competition for development.

New Changan will realize "guarantee four-stroke three"

According to the reorganization plan, AVIC allocated Changan Automobile, a subsidiary of the Armed Forces Group, for its shares in Changhe Auto, Hafei Motors, Dongan Power, Changhe Suzuki and Dongan Mitsubishi. The two groups reorganized and established the new Changan Automobile Group. The Corps Group holds 77% of shares and AVIC holds 23%.

The future direction of the new Changan Automobile is to develop mini vehicles and new energy vehicles. According to reports, the new three-year goal of Chang'an is: By 2012, the total vehicle sales will exceed 2.6 million units, which will initially have the ability to participate in the international mainstream automotive market competition.

After this reorganization, Changan Automobile will achieve its goal of “guaranteeing four-pronged three” and will form an impact on Dongfeng Group and enter the camp of the top five automobile groups supported by the country.

Challenge the status of "Wuling" microcar boss

As early as 10 years ago, Changan, Hafei, Changhe, and Wuling in the microcar companies had been known as the “four little kings” because each company had an annual sales of about 100,000 vehicles. After more than ten years of market trials, SAIC-GM-Wuling is now in a race to keep up with dust. Chang'an is chasing it. Changhe and Hafei are in decline.

In 2008, Wuling sold 545,000 microcars with a market share of 51.27%, while Changan, Hafei and Changhe had 25.27%, 10.19%, and 3.80% of the mini vehicle market share, respectively.

Since the beginning of this year, the mini-vehicle market has experienced explosive growth under the encouragement of the country’s “car to the countryside” policy. However, Hafei, Changhe and other companies are still unable to keep up with the growth rate of the entire market. SAIC-GM-Wuling also held a ceremony for annual sales of 1 million vehicles a few days ago.

New Changan dominates and there are still many problems

Now, will the new Chang'an, which has been incorporated Changhe and Hafei, form an impact on SAIC-GM-Wuling?

According to statistical data, in the first half of 2009, the combined market share of Chang'an, Hafei and Changhe was 44.2%, which is comparable to Wuling’s 44.7%. But in fact, SAIC-GM-Wuling’s advantages are still outstanding. The two major shareholders have rich experience in operation and management, and have a high level of marketization. SAIC-GM-Wuling has gradually formed a self-innovation model of “focusing on me and integrating resources”.

Zhong Shi, an independent contributor to the automotive industry, said that the strength of military product processing is very strong, and there is no problem in the hard aspect. However, in terms of marketization, military enterprises have always had flaws. They can't do local companies, such as SAIC-GM-Wuling. Small enterprises are flexible and have no thoughts and burdens. They can do very well in adapting to the market.

Although the new Changan has completed restructuring in the form of equity, it will also need to solve a series of problems such as adjusting product structure, integrating sales channels, and coordinating production capacity distribution. In addition, the integration of a number of corporate cultures will also test New Chang’an.

Therefore, in order to realize the scale efficiency after integration, “the hegemony” micro-vehicle market, the new Changan has a long way to go.

GM China: Will not feel more competitive pressure

Yesterday, on the reorganization of Changan, GM Deputy General Manager Chen Shi told reporters: “I was very excited to hear the news. We welcome their joint efforts.” Chen Shi said that he did not think that the joint venture of several companies was common to SAIC Motor. Wuling makes a greater competition because the competition in the micro-vehicle industry is already quite full, but SAIC-GM-Wuling is sure to get better development.

SAIC-GM-Wuling: Restructuring and consolidation is the trend

"Restructuring and integration should be a trend in the development of China's auto industry. Changan has always been our very respected competitive partner. We pay great attention to this reorganization of Changan Automobile." Yesterday, SAIC-GM-Wuling’s director of administration and public relations Cai In an interview with reporters, Ya said that from the perspective of market segments, Changan's restructuring will have a positive effect on the scale of micro-vehicles and will help improve the level of industry competition. "There will be competition for progress."


View related topics: Military Equipment Group and AVIC Restructuring - Changan M&A Changhe Hafei


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