Restructuring of China’s Automotive Industry


There has recently been news regarding the restructuring of Fujian Motor Industry Group Corporation (“Fujian Motor”) led by the Fujian Development and Reform Commission. There have been several talks on the restructuring of Fujian Motor in the past, but nothing has been official.

In 2009, Fujian Motor and Beijing Automotive Industry Holding Corporation (“Beijing Auto”) were in talks over Beijing Auto’s plans to acquire a 40% stake in Fujian Daimler Automotive. At that time, the Fujian government owned 50% equity of Fujian Daimler Automotive. Fujian Motor and Beijing Auto were close to signing an agreement together, whereby 40% of the equity of Fujian Daimler Automotive would be transferred to Beijing Auto, while the other 10% would still be owned by Fujian Motor. However, the talks of restructuring failed.

The automobile industry in China has grown at a rapid pace with annual sales of over 18 million. However the Chinese automotive industry remains very fragmented and plagued by the problems of small scale and diversified operations. The Chinese government has been actively encouraging the automobile industry to improve efficiency and curb overcapacity by pushing for mergers and restructuring in the automobile industry.
The restructurings of automobile companies in China are likely to be driven by the foreign investors, who will try to find cooperative partners to expand into the China market. Nevertheless, as long as the automobile companies can operate well on their own, restructurings will always be hard to achieve.