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Experts from the China Automotive Technology and Research Center believe that the ultimate outcome of the Chinese auto industry's restructuring will be the formation of a few large-scale enterprise groups. These groups would have substantial production capacities, strong technical development capabilities, standardized product lines, and efficient division of labor and cooperation. Ultimately, these groups would dominate a significant portion of the domestic auto market.
Recently, SAIC Group and Nanjing Yuejin Group signed a letter of intent for collaboration, signaling a comprehensive partnership between the two. Industry insiders suggest that this agreement marks the first step toward full integration between SAIC and NAC. Analysts in the sector view this partnership as a major milestone in the ongoing consolidation of China’s auto industry, indicating the start of another wave of major restructuring. This move is expected to enhance industry concentration and eventually reshape the current fragmented and chaotic landscape of the Chinese auto market.
Currently, there are over 130 automotive companies in China, making it one of the most competitive markets globally. According to data from the China Association of Automobile Manufacturers, the top ten automakers accounted for more than 84% of total sales in 2006. The remaining 120 manufacturers collectively sold less than 1.2 million vehicles, with most having annual sales below 10,000 units. This highlights the highly fragmented nature of the industry.
The automotive sector is known for its economies of scale. Over the past century, global auto markets have seen continuous consolidation, evolving from a landscape of thousands of competing firms to a few dominant players. In 2006, global vehicle production surpassed 50 million units, dominated by nine major companies: GM, Toyota, Ford, Volkswagen, Daimler-Chrysler, Renault-Nissan, Peugeot-Citroën, Honda, and BMW, along with Hyundai Motor. The top three alone accounted for nearly half of global output. For reference, GM sold 9.09 million units, Toyota 8.8 million, and Ford around 8 million—each surpassing China’s total annual sales from the previous year.
In recent years, mergers and acquisitions in China’s auto industry have been on the rise, including collaborations like FAW and Tianqi, and Changan and Jiangling. Among the top ten automakers, Geely is the only private company, while the rest are state-owned enterprises. However, many of these companies are under different government jurisdictions, which can complicate restructuring efforts. For instance, FAW and Dongfeng are directly under the central government, while Changan is affiliated with the China Ordnance Equipment Group. SAIC, BAIC, GAC, and Chery are local state-owned enterprises, managed by regional SASACs. Given the industry’s high investment and tax contribution, local governments often resist merging with out-of-province companies.
SAIC and Nanjing Auto are both local state-owned enterprises. Initially, they each acquired parts of the UK-based Rover brand—SAIC took the software side, while NAC obtained the hardware. SAIC developed its own brand, Roewe, based on the Rover 750 platform, while NAC replicated the MG models. Their products, derived from similar technology platforms, inevitably led to competition in the domestic market. Despite this rivalry, discussions about collaboration never ceased. Nanjing Auto’s chairman, Wang Haoliang, had long expressed openness to partnerships, and high-level visits between the two companies increased after the Shanghai Auto Show. By mid-July, SAIC executives visited Nanjing, and on July 27, both parties signed a cooperation agreement.
Zhang Guobao, deputy director of the National Development and Reform Commission, emphasized the need for rational development in the Chinese auto industry, advocating for controlled investment and supporting mergers and acquisitions. The collaboration between SAIC and Nanjing Auto received strong backing from the governments of Shanghai and Jiangsu. This partnership is expected to promote resource integration, accelerate independent innovation, reduce fixed asset investment, improve asset efficiency, and optimize resource allocation across R&D, procurement, production, and sales. It also helps diversify product offerings and strengthen the value of independent brands, leading to a win-win situation for both companies.
Experts from the China Automotive Technology and Research Center believe that the final outcome of the reorganization will see the emergence of several large-scale enterprise groups with significant production capacity, strong technical capabilities, and well-structured product lines. These groups will dominate the market. Considering China’s uneven economic development and diverse consumer demands, some companies focusing on product differentiation may still find space for growth.