A tie-up between Shanghai Auto, China's biggest car maker, and smaller rival Nanjing Auto could lead to the creation of a Chinese national car champion to rival the big multinationals. Shanghai Automotive Co said on Friday that parent groups of the two-story sources and analysts said.
"Shanghai Auto is number one in the domestic passenger car market. A tie-up would shore up its commercial vehicle segment and boost its overall competitiveness," said Zhang Xin, senior industry analyst with Guotai Junan Securities.
The announcement may also indicate the government, after years of policy declarations but little success, is stepping up efforts to force consolidation of China's fragmented auto industry, which is crowded with more than 100 players.
Officials in Beijing have said they want to see an industry which centres around three or four auto groups that have the resources and technology to succeed globally.
Shanghai Auto gave no details of what form a tie-up might take, and stressed there was much uncertainty about the plan because any transfers of assets or equity stakes would need approval by the government, company boards and shareholders. "We have just expressed our willingness to cooperate with Nanjing Auto," a Shanghai Auto executive said on condition of anonymity.
"What kind of agreement we would reach and whether it involves any equity transaction remain to be seen."
Industry sources said the two companies remained far apart on terms of any tie-up. Shanghai Auto has been insisting on final control of any alliance, while Nanjing Auto wants an equal voice, the sources said.