China encourages M&As in auto industry

Feb. 25, 2009 (China Knowledge) - China's State Council earlier this month approved a stimulus plan for the automobile industry, aiming to cut the number of larges-scale auto-manufacturing groups to 10 or less from the current 14 mainly through mergers and acquisitions (M&As), the China Securities Journal reported today.

The large-scale auto-manufacturing groups refer to those with market share of over 90%, according to the report.

The move aims to optimize the industrial structure and enhance the market share of homegrown auto brands. Under the restructure plan, two to three giant auto groups are expected to be formed, each with annual production of more than 2 million vehicles. Another four or five groups are expected to have an annual output of over 1 million vehicles each.

Meanwhile, China expects to boost the market share of homegrown passenger cars to over 40%, and the exports of homegrown brands is estimated to exceed 10% of total auto exports.

In addition, the government will provide subsidies worth RMB 5 billion for auto purchases in rural areas, which will take effect from Mar. 1 to the end of 2009.