Chinese Auto Companies to Merge
By Brendan Moore
The largest auto manufacturer in China, Shanghai Automotive Industry Corp., and Nanjing Automobile Group, the owner of MG, have announced plans to merge.
Shanghai Automotive produced around 350,000 cars through its joint ventures with General Motors and Volkswagen in the first 5 months of 2007. It has also started producing cars under its own brand in 2007.
Nanjing Automobile is a much smaller concern, but it owns one of the most recognized brands in the world, the famous MG Rover brand of England. Nanjing outbid Shanghai for the rights to the failed MG Rover in 2005, surprising everyone in the process. Nanjing started producing MGs in China in March, started limited production again at the famous MG plant in Longbridge, England last month, and has vague plans to build MGs in Ardmore, Oklahoma as well.
It is well known that Nanjing’s efforts to revitalize the MG Rover concern have taken a heavy financial toll on the company. Additionally, the company has made some public relations missteps in the U.K. regarding their efforts to re-start production and market the cars in England. Nanjing also over-estimated the brand power of MG in China, and has not experienced the anticipated welcome in the local market it counted on for their MG coupes and sedans.
As an example, Nanjing’s sales brochures in China state that MG stands for “Modern Gentleman” since the company believes that “Morris Garages”, the original meaning behind the initials in the famous octagon, does not resonate with prospective buyers in China.
Concurrent with their difficulties with the MG Rover business, Nanjing is also deep into in a so-far disastrous joint venture with Fiat in China.
The announcement of an impending merger lines up with the Chinese government’s keen desire for the many companies in all industries in China to merge and create strong national entities to compete on the global stage.
No other details in terms of timing of the planned merger are available at this time.
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