Detroiting Shanghai

The inevitable and Beijing-driven consolidation of the auto industry has taken another step forward with news that Shanghai Automotive Industry Corp. and Yuejin Group, the parent of Nanjing Automobile, have signed a letter of intent on cooperation. SAIC is the domestic market leader and has joint ventures with Germany’s Volkswagen and the U.S.’s General Motors. NAC has a partnership with Italy’s Fiat and in 2005 bought the bankrupt MG Rover Group in the U.K. SAIC also owns some Rover technology.There are no hard details of what cooperation between the two state-owned companies means in operational terms, but if it proceeds to a full merger, it would create China’s biggest carmaker, with likely production of 2 million vehicles a year by 2010.China has more than 100 automakers, which Beijing wants to reduce to three or four internationally competitive groups, much as the ‘Big Three’ emerged in the U.S. from dozens of smaller firms — though it might be better served looking to Nagoya rather than Detroit these days. The forced consolidation is part of Beijing’s policy of producing national champions in 20 strategic industries. It now seems to be forcing the issue.

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