M&A in auto sector calls for structural adjustment

• Source: Ce.cn
• [10:52 July 30 2009]
• Comments

In recent years, China's automobile industry has been growing rapidly. There are both achievements and some problems, such as irrational industrial structure and low technology level, etc., thus allowed structural adjustment to become a natural requirement for the industry's further development.

The outbreak of international financial crisis made the structural adjustment ahead of schedule. Plan on Adjusting and Revitalizing the Auto Industry clearly pointed out that the merger and reorganization of auto industry should be push on by taking structural adjustment as the baseline.

According to statistics of China Association of Automobile Manufacturers, auto manufacturers with sales volume ranking top ten in 2008 had a total sales volume of 7.8201 million, accounting for 83 percent of total vehicle sales. While the aggregate sales of the rest companies took up only 17 percent, some of which failed to meet the requirement of scale economy.

Exceeding enterprises and dispersing investment made the limited resources are difficult to be utilized effectively; and the talents, technology and capital are wasted. It is the only way for China's auto industry to optimize industrial structure and improve international competition by putting forward the merger and restructuring of enterprises and improving the concentration and level of the industry.

With the international financial crisis, some less competitive auto enterprises with weak technology strength have been put into a corner, their awareness and pressure for merger and reorganization have increased markedly. It created opportunities for the powerful large corporation groups to accelerate resource integration and enlarge advanced production capacity.

As far as the merger and restructuring of auto enterprises are concerned, Plan on Adjusting and Revitalizing the Auto Industry requires sticking to structure adjustment, paying attention to the association of market role with governmental guidance.