In 2007, the Chinese auto industry witnessed several key developments, but none were as significant as the "Southern Cooperation" initiative that marked a turning point. On the eve of the official signing ceremony, SAIC, the parent company of SAIC Motor (600104.SH) and Nanjing Automobile Group, along with Yuejin Group, is set to formalize a comprehensive cooperation agreement in Beijing. This move is seen as one of the most impactful mergers in China’s automotive sector to date.
Industry analysts believe that once this cooperation moves into the merger and acquisition phase, it could become the largest M&A deal in the domestic auto industry. The integration of Nanjing Auto’s entire vehicle business into SAIC Motor, alongside the merging of parts and service operations, is expected to significantly boost SAIC's scale. With further expansion, SAIC Motor is anticipated to become the largest car carrier in China, surpassing 2 million vehicles annually.
According to insiders, the historic signing will take place at the Diaoyutai State Guesthouse on the 26th, under the supervision of the National Development and Reform Commission. Meanwhile, Shanghai Automotive recently announced the successful issuance of convertible bonds worth 6.3 billion yuan, raising an impressive 83.96 billion yuan in total funds. This marks a record high for frozen capital in such offerings, providing crucial financial support for the upcoming M&A activities.
Additionally, both parties held a workers’ congress yesterday, where they officially approved the South-South cooperation plan. This collaboration was first initiated by SAIC Chairman Hu Maoyuan on April 19, when he extended an olive branch to Nanjing Auto. Later, on July 30, SAIC and Yuejin Group signed a letter of intent for comprehensive cooperation, setting up a joint working group to explore asset reorganization and full integration between the two entities.
The "Southern Cooperation" is largely driven by government policy and reflects national strategies for the automobile industry. Both companies have acquired key assets from Rover UK: SAIC obtained the intellectual property and R&D team, while Nanjing Auto owns the equipment, engines, and the MG brand from the Longbridge production base. Through this partnership, SAIC aims to strengthen its commercial vehicle market share and enhance its sedan brand, while Nanjing Auto gains access to financial, technical, and managerial resources to improve profitability.
This collaboration is expected to reduce redundant investments and optimize resource allocation across R&D, procurement, production, and sales. It is also planned that Nanjing Auto will inject its vehicle and parts assets into SAIC, after which it will hold no more than 10% of the shares. The two brands—MG and Roewe—will coexist, but with distinct positioning.
Hu Maoyuan recently mentioned that SAIC Passenger Car Company currently only has the Roewe 750 model, but by 2010, with the launch of five new platforms, the brand will mature and reach a production capacity of 500,000 units, entering the top tier of China’s self-owned brands.
Nanjing Automotive Group has net assets of 2.6 billion yuan, with 28 subsidiaries, seven joint-stock companies, and 400 affiliated enterprises. It currently includes three major manufacturers—Nanjing Nanjing Fiat, Nanjing Iveco, and others—with a total annual output of 200,000 vehicles. However, the future structure of the merged entity remains uncertain, leaving many questions unanswered.
Industry sources suggest that Chen Zhixin, executive vice president of SAIC, may lead Nanjing Auto. It is also reported that SAIC has decided to assign him to oversee its own brand business, signaling a strategic shift in leadership and focus.
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