SAIC Buys Nanjing Automobile
It only seems like it took forever.
Shanghai Automotive Industry Corp (SAIC), corporate parent of Shanghai Motor Corporation in Beijing, has acquired Yuejin Motor Group, parent of Nanjing Automobile (Group) Corp.
The much-anticipated deal allows SAIC to take over all the key assets of Nanjing (which includes MG Rover) for the price of approximately $286 million USD.
The deal not only gives SAIC a great launching pad into Europe via the MG and Rover brands and the factory that produced same in Longbridge, England, it also consolidates part of the second-largest auto market in the world; that is, their home market of China. The same home market, incidentally, that put up a gaudy 35% growth rate in 2006. The takeover of Nanjing Automobile will make SAIC a much more formidable competitor to the foreign companies like GM and VW that currently control the largest market shares in China.
Part of the deal also requires Fiat to divest their 50% of Nanjing by selling it back to Nanjing. The guys at Fiat probably threw a party when they got that news because the joint venture has never met a single production or sales goal since it opened, and Fiat has been unhappy in that marriage for some time now. As an example, Fiat had forecast their sales from the joint venture to hit 300,000 units by 2010, and they just barely made it above 30,000 this year. So, Fiat will hardly be crying all the way to the bank when they cash that check for their 50% of Nanjing.
Fiat says that they will continue to cooperate with Nanjing on commercial vehicles and parts manufacture, but I think that statement is probably just window-dressing on the divorce so that both companies can save face concerning the break-up.
China’s annual economic growth has averaged 9 percent annually over the past 10 years, which has produced a tremendous amount of middle-class and upper-class car buyers new to the market. The country overtook Japan late last year as the world’s second-largest vehicle market after the United States.
Vehicle sales in China will pass eight million this year, and easily surpassed the full-year tally for 2006 in the first 11 months of 2007, according to the China Association of Automobile Manufacturers. There has been some discounting recently as manufacturers try to gain market share, but the overall new car market in China is expected to stay strong for years to come.
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