Capacity utilization rate is less than 75% The policy encourages car companies to merge and restructure


The merger and reorganization policy of the automobile industry finally came to the end.

In January, the Ministry of Industry and Information Technology, the Ministry of Finance, and the National Development and Reform Commission jointly issued the "Guiding Opinions on Accelerating the Merger and Restructuring of Enterprises in Key Industries" (hereinafter referred to as the "Guiding Opinions"). Nine industries such as automobiles were listed as mergers and reorganizations. Insiders pointed out that this move will help solve the problem of low capacity utilization rate in the Chinese auto industry and increase the utilization rate of resources in the auto industry.

The "Guiding Opinions" clearly stated that by 2015, the industry concentration of the top 10 vehicle manufacturers will reach 90%, forming 3 to 5 large-scale automobile enterprise groups with core competitiveness. With the exception of SAIC Motor, Dongfeng Motor Group, Changan Automobile Group, and FAW Group, which have more prominent leading positions, other auto groups are faced with the acceleration of catch-up, or they are the leading choices for market segments. BAIC Group has been asked by the competent authorities to "be among the top three."

If only the concentration of industry is used as a measure, auto groups can only take the short-cuts of acquisition. This is also the direction encouraged by the new policy. The "Guiding Opinions" clearly states that the entire vehicle company will be promoted horizontally. Encourage auto companies to integrate element resources through mergers and acquisitions, optimize product lines, reduce operating costs, increase capacity utilization, vigorously promote the development of independent brands, foster core competitiveness of enterprises, and achieve scale and intensive development.

In 2012, Guangzhou Automobile Group became the most enthusiastic purchaser. After successfully reorganizing Changfeng Automobile, Guangzhou Automobile Group and Chery Automobile formed an alliance. In addition, GAC Group cooperated with Hebei Zhongxing to expand its SUV and pickup market. At the same time, the rumors of the Guangzhou Automobile Group restructuring Fuzhou Group are not far behind.

Encouraging reorganization stems from the fact that China's auto industry is big and not strong. Although China’s auto industry has ranked first in terms of global sales for the fourth consecutive year, the Chinese auto group is facing the plight of “multiple children and more fights”. Many weak automakers continue to empty their production capacity, and it is difficult for advantageous companies to expand production capacity for various reasons. According to a research report from Galaxy Securities, the total capacity of the 36 major passenger vehicle companies expanded by 76% in 4 years, and will reach 206.5 million vehicles in 2013, and only 11.73 million vehicles in 2010. The total production capacity of self-owned brand automakers increased by 76%, from 5.82 million vehicles in 2010 to 10.24 million vehicles in 2013. At the same time, the average capacity utilization rate of passenger cars has drastically dropped from 110% in 2010 to 74.5%, and the utilization rate of self-owned brands has dropped from 100% to 58%.

Although the "Guiding Opinion" does not clearly indicate how to measure the core competitiveness, many car companies believe that the self-owned brand may become one of the metrics. Many large auto groups have speeded up the layout of their own brand cars. In the top five auto group businesses, sales of self-owned brand autos accounted for a relatively small proportion, and there were fewer successful people in the mid- to high-class car market; and the overall production capacity idle rate of independent brand auto makers was also high. Insiders pointed out that this will provide major acquisition opportunities, the weak will be annexed by the strong.

It is reported that among the 19 self-owned car companies, SAIC-GM-Wuling has the highest utilization rate of 104%. SAIC-GM-Wuling executives repeatedly stated that workers can't meet market demand by working overtime. The capacity utilization of FAW Xiali and Changan Automobile is not satisfactory. The capacity utilization rate of FAW Xiali dropped from 100% in 2010 to 23%, and the capacity utilization rate of Changan Automobile was approximately 46%.

Many car companies stated that if they can rank among the top 3 to 5 large-scale automobile enterprise groups with core competitiveness, they will gain more advantages in resources. Insiders pointed out that this also means that the competent authorities may shrink the encouragement list. In 2009, the “Detailed Rules for the Adjustment and Revitalization of the Automotive Industry” promulgated in the "Details of the "Four Small and Four Small" concept, encourages SAIC Motor, FAW Group, Dongfeng Motor Group, and Changan Automobile Group (collectively called the "Big Group") to be used nationwide. Internal mergers and acquisitions were implemented to support the implementation of regional mergers and acquisitions by Beijing Automotive Industry Corporation, Guangzhou Automobile Group, Chery Automobile and China National Heavy Duty Truck (collectively known as the “Four Small Group”).



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