Guangzhou Auto and Chery to Partner, Official Announcement Due on November 3rd
Published October 26, 2012
The Chinese auto market is made up entirely of individual auto makers, there are the larger state owned companies that have several of their own brands, such as SAIC that owns Roewe and MG and Maxus, and First Automobile Works that owns Xiali, Besturn and Hong Qi, but these companies are shouldering the burden of design and development entirely by themselves, as we have seen from Europe and North America, the continuing burden of R&D is one that eventually leads to death creating a catch 22 situation where companies either innovate or die, or die without innovating.
Earlier this week Chery and Guangzhou Auto announced that the two companies had reached an agreement regarding a new partnership between the two companies, at first it was thought to be a merger but as more information is leaked it seems the two companies will focus on jointly developing automotive technology with an official announcement being made on November 3rd.
The new partnership will effectively put Chery and Guangzhou Auto ahead of the crowd in terms of mergers and acquistions, the Central Government several years ago insisted that the Chinese auto market must see more M&As to contract the number of players in the field and also create two or three world class auto makers.
Both Chery and Guangzhou Auto have been very pro-active in reaching out to international automakers that wish to produce in China, Guangzhou Auto has signed with Fiat, Mitsubishi, Toyota and Honda in the past decade whilst Chery has set up a substantial product line and signed joint venture deals with Jaguar-Land Rover and has also established Qoros Auto with Israeli Corp, the first Qoros vehicle will be launched in early 2013.
Fiat seems to be the large connection between the two, in 2007 Chery signed a 50:50 joint venture with Fiat to produce the Alfa 159 and Fiat D200 in the Chinese market, under the agreement Chery would produce Fiat vehicles in China but Fiat wanted more, insiders indicated that Fiat wanted to work with Chery to develop new vehicles for the Chinese market where as Chery were only eager to offer up production space, management and workers and Fiat would provide the car models. Expectations were different on both sides, and ultimately the project failed, in 2008 Fiat signed with Guangzhou Auto.
Chinese media reports are hinting that Guangzhou Auto maybe looking for a partner to offset profit loss due to the recent fall out between China and Japan, Guangzhou Auto apparently takes 94% of its income from partnerships with Toyota and Honda but with sales down nearly 50% in September it could be that Guangzhou Auto are looking for a long term reliable partner.