SHANGHAI, July 28 -- THE Shanghai Automotive Industry Corp yesterday signed a letter of intent with the Yuejin Motor (Group) Corp that will allow it to tie up with the Nanjing Automobile Corp.
The result will be the biggest alliance in China's auto industry for developing home-branded model.
China's largest auto maker and Yuejin plan to jointly set up panels working on the possibility of cooperation on complete cars, auto parts and auto trades between the two state-owned car makers, SAIC said in a statement late yesterday.
The proposed synergy is based on an assets-restructuring program for both Jiangsu Province-based Yuejin and its subsidiary, Nanjing Auto, with the aim of a comprehensive cooperation with the SAIC, the statement added.
Analysts said the announcement marks the launch of a long-awaited merger between SAIC and Nanjing Auto, which acquired assets and intellectual property rights from the failed British MG Rover Corp to make their own-branded vehicles. "The cooperation will combine the strength of each other and will be carried out in an extensive way," SAIC said in the statement.
"The unity should help to consolidate resources for better efficiency, improve research and development capabilities, expand product mix and lift brand value for a win-win situation."
SAIC lost out to Nanjing Auto in a bidding for the bankrupt MG Rover in 2005. It spent 67 million pounds (US$136.21 million) to get the technology for two Rover models, which helped its listed unit, Shanghai Auto, to unveil its own version of Rover 75 last year, called the Roewe 750 sedan.
Nanjing Auto took over the MG brand and complete assembly lines with a 50-million-pound investment. It will sell the Chinese-made MG-branded models - starting next month - as part of a US$2 billion investment to revive the historical brand worldwide.
SAIC didn't elaborate on the cooperation agreement yesterday, saying the consolidation will avoid competition issuer with Shanghai Auto.
The alliance is encouraged by the central government, which called on more efforts to set up competitive Chinese auto giants.
"SAIC will benefit from rich models and manufacturing facilities and Nanjing Auto will gain support after facing a financial shortage after the MG acquisition," said Zhang Xin, an analyst from Guotai Jun'an Securities Co Ltd.
But Zhang said it was too early to predict whether the liaison will be a success as "no details were released."