Chinese gov't wants to consolidate major automakers to 10
China is determined to raise its annual domestic car sales to 10 million units this year, and also wants sales to grow by another 10% every year for the next three years. It aims to achieve those numbers with a comprehensive investment in the company's transportation sector, beginning with merging China's 14 major automaking groups into ten. Doing so, they say, will help the development of new products and seriously slash costs in overlap.
The government's long term vision of the auto landscape in China would be three large automakers selling more than two million vehicles per year and at least four smaller groups selling above a million. To insure that they all have buyers, Chinese authorities will buy more Chinese cars, subsidize rural purchasers with 5 billion yuan ($732 million) in subsidies, offer rebates to those trading in used cars for new ones, eliminate road tolls and expand urban infrastructure. It's ambitious, for sure, but if the government can get the industry to go along, China certainly has the money to handle the rest.
[Source: Gasgoo, Photo by China Photos/Getty]
Reader Comments (Page 1 of 2)
hypermiler 6:08PM (3/03/2009)
This proposed consolidation won't happen. China's 100 automakers are regional government owned and would not agree to merger in fear of job losses in their legion.
Furthermore, divide the market volume of 10 million units a year by 10 groups and each proposed automotive groups get 1 million units in volume in average. This is not enough to create an economy of scale necessary in creating competitive auto companies after consolidation.
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Polly Prissy Pants 6:13PM (3/03/2009)
It's still China, right? Can't the Chinese gov't pretty much do whatever it wants?
Human Powered 6:34PM (3/03/2009)
Polly Prissy Pants, hypermiler is right, there is an interesting balance of regional and central government power in China. The regional governments are surprisingly independent and very defensive about jobs within there region. There is already consolidation occurring, but not in the traditional western sense. We are beginning to see some leaders emerge and other domestic manufacturers starting to become niche players. With government (central or regional) support we will not see OEMs fail or merge like we would in the U.S. after all there are 1.3 billion people that need jobs. When you start cutting those civil unrest becomes a real problem. NIMBY.
tekd 7:06PM (3/03/2009)
It's really too bad that the regional governments wield so much power in China since some of them are just horribly run. And the corruption is still seriously ridiculous at the regional level.
But I think the central government should be able to prod them along on this issue since having 100 car companies who don't have nearly enough money to do R&D doesn't help the regional economies. It's better to merge them up so they have enough money to do meaningful R&D and can spread costs across more cars. So I think you can fairly easily make the case to these smaller car companies and the provincial governments that own them that it's in their own best interest to merge.
Right now there's just too much money being wasted on random regional car companies that make pretty questionable cars. And seriously I just can't see any of these tiny companies being able to do anything meaningful as far as R&D goes...it's good that China has so many car companies since they have to compete, but having tons of crappy car companies exist is pretty stupid.
Mazda FTW! 6:14PM (3/03/2009)
So many Chinese drivers...so few left lanes...
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Xcountryflyer 6:16PM (3/03/2009)
Even 10 seems like too many.
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big J 12:59PM (3/04/2009)
tell that to detroit
xtasi 6:22PM (3/03/2009)
I would raise emissions and safety regulations. Not all manufacturers would survive. That way, the market will make consolidations happen. The govt should only buy cars that meet higher safety/emission regulations. That would be the incentive.
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Mobius_1 6:49PM (3/03/2009)
Consolidation would be good for them. They can save on lots of costs and become much more advanced and just in general better when and if that happens. The last thing needed is every damn firm researching the same technology at the same time and all doing distinct advertisements for very very similar (crap) cars.
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Chris 8:49PM (3/03/2009)
10 copies of western cars
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Chris 8:50PM (3/03/2009)
Damn it ---- thought my < < was html!
10 copies of western cars < < 14 copies of western cars!
(ahh... that's better)
Sektor 8:53PM (3/03/2009)
Nice, a prejudiced and idiotic comment!
I was worried nobody would come up with one!
Randy915 12:00AM (3/04/2009)
10 years ago people like you, Chris, joked the Chinese can't make a car. Now it's copying cars, so at this rate 10 years from now people like you will say Chinese people can't drive properly so what's the point in those great, original cars they're making?
geo 8:52PM (3/03/2009)
Sorry to nitpick, but the Chinese government would be ensuring that they all have buyers.
http://grammar.about.com/od/alightersideofwriting/a/assurenesureglo.htm
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the vegas style guy 6:59AM (3/04/2009)
I'm assuming that these companies are owned in part (if not fully) by the Army of Communist China.
I hope they all fail.
I'm not real big on communism.
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Sektor 9:07AM (3/04/2009)
Some of them are government owned.
I would hardly call China communist these days though.
John 12:00PM (3/04/2009)
Agreed. China is no more communist than any government taking over private equity firms, the auto industry, and the health care field. Oh, wait a minute......
big J 12:58PM (3/04/2009)
considering you know absolutely nothing on the subject it probably be in your best interest not to comment on subject matter like this next time.
the vegas style guy 1:27PM (3/04/2009)
BIG J:
I know quite a bit about China. I can tell you more about China from the beginning of the 20th century until now than you probably know about American history. I also know that China has thrown the basic principles of true communism under the bus.
China has, however, clung dearly to the sad by product of communism, dictatorship and rule by terror. Further, China's military has a hand (or tentacle) in every single major industry in the country. If you don't know that then you should spend less time at Autoblog and more time at any competent news site on the web.
China is a despicable totalitarian regime that kills thousands upon thousands of its own citizens for trumped up reasons, limits freedom of religion (ask Falun Gong about the Chinese military and "slave" labor camps) and speech.
We as a country support this heinous regime, military and system everyday at Wal Mart and every other large corporate chain. The last thing I want is to go from sending our money to the Chinese military in small chunks (LOL, MASSIVE chunks of small things) to sending our money in large chunks through the sale of millions of Chinese cars. If you believe in Chinese hegemony, support the rape of central (Muslim) Asia and especially the ethnic cleansing of Tibet, then, by all means, support the Chinese military and buy a Chinese car. I would rather not.
In closing, don't you ever deign to question my intelligence. I am no Rhodes Scholar and often here I will ask my fellow AB readers for info on a subject. Having said that, I will go toe to toe with anyone here on geopolitical matters.
Except for you.
I like a worthy opponent. And you sir, are not.
Sektor 8:48PM (3/06/2009)
@vegas style guy: your last post right there just proves you know nothing about China; at least nothing beyond the stupid fear mongering and propaganda propagated by a biased and bigoted Western media.
It's not even worth arguing when people who have been brainwashed to this point. It is actually kind of sad.