Caixin
Dec 02, 2017 10:22 AM
BUSINESS & TECH

Big State Automakers Join Hands for New Tech, Global Foray

China’s three big central government-owned automakers Friday signed an agreement to jointly develop new automobile technology and expand the profile of Chinese cars in overseas market.

The three are FAW Group Corp., Dongfeng Motor Corp. and Changan Automobile Group. They are among the country’s four biggest automakers, along with No. 1 SAIC Motor Corp., which owned by the local government of Shanghai.

Under the agreement, the three carmakers will cooperate on technology innovations such as new energy, smart driving and new materials. The companies will jointly invest in, develop and share the new technologies.

They will also work together in manufacturing, procurement and logistics, to explore new business models and expand overseas.

Backed by the central government, the three companies have maintained close ties and have swapped top executives over the past two years, sparking speculation that China may consider a mega merger among the three. But the companies have denied the speculation.

In July, FAW Chairman Xu Ping was named chairman of China South Industries Group, the parent of Changan Automobile, while China South Industries’ General Manager Xu Liuping became FAW chairman.

Xu Ping took over FAW in May 2015, transferring from his previous post as Dongfeng chairman.

In February this year, FAW and Dongfeng Motor signed an agreement to build a joint innovation center.

Although China has become the world’s largest electric car market with more than 500,000 units sold last year, the biggest state companies have lost market share to foreign and private competitors because of sluggish internal decision-making, an FAW source told Caixin.

Analysts said they expect the latest partnership to help the companies regain lost competitive ground.

“I am optimistic about this effort,” said Peng Bo, co-founder of the global strategy consulting team PwC’s Strategy&. Peng said the partnership reflects the big state automakers’ changing mindset to rely more on collaboration in future development.

But how such efforts can achieve the goals will depend on implementation, such as setting up a responsibility system for specific projects and streamlining decision-making, Peng said.

Contact reporter Han Wei (weihan@caixin.com)

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