In 2007, the Chinese auto industry witnessed a series of significant developments, but none stood out as sharply as the "Southern Cooperation" that took center stage. This strategic alliance between SAIC Motor (600104.SH) and Nanjing Automobile Group, along with Yuejin Group, marked a turning point in the domestic automotive landscape. On the 26th, a historic signing ceremony will be held at the Diaoyutai State Guesthouse in Beijing, under the supervision of the National Development and Reform Commission, where both parties will officially sign a comprehensive cooperation agreement.
Industry observers believe that this collaboration could become the largest merger and acquisition deal in China’s automobile sector to date. The integration of Nanjing Auto’s complete vehicle business into SAIC Motor is expected to bring about a more efficient operation, with parts and service trade activities also being consolidated under SAIC. Following this expansion, SAIC Motor is anticipated to become the country's largest car manufacturer, with annual sales surpassing two million units.
To support this ambitious move, Shanghai Automotive recently issued convertible bonds worth 6.3 billion yuan, raising an impressive 83.96 billion yuan through its public offering. This substantial funding is seen as a crucial step forward for the M&A process. Additionally, both companies’ workers’ congresses have formally approved the South-South cooperation plan, signaling strong internal support for the initiative.
The collaboration was first announced on April 19th when SAIC Chairman Hu Maoyuan extended an olive branch to Nanjing Automobile Group. Later, on July 30th, SAIC and Yuejin Group signed a letter of intent for “Comprehensive Cooperation,†establishing a joint working group to explore asset restructuring and full integration between the two entities.
This partnership is heavily influenced by government policy and reflects national strategies aimed at strengthening the domestic auto industry. Both SAIC and Nanjing Auto have acquired key assets from Rover UK—SAIC gained intellectual property rights and most of the R&D team, while Nanjing Auto owns the intellectual property of the Longbridge production base, including the MG brand.
Post-integration, SAIC Motor is expected to expand its commercial vehicle market share and enhance its sedan brand, while Nanjing Auto will benefit from financial, technical, and managerial support. This move aims to eliminate redundant investments and optimize resource allocation across R&D, procurement, production, and sales.
The cooperation is likely to proceed through a share exchange, with Nanjing Auto injecting its vehicle and parts assets into SAIC. After the transaction, Nanjing Auto is expected to hold no more than 10% of SAIC shares. The two brands—MG and Roewe—will coexist, but with distinct positioning. According to Hu Maoyuan, SAIC’s self-branded Roewe 750 sedan is just the beginning, with plans to launch a full range of products by 2010, aiming to achieve a production capacity of 500,000 vehicles and engines.
Nanjing Automotive Group has net assets of 2.6 billion yuan, with 28 subsidiaries, seven joint-stock companies, and 400 affiliated businesses. It currently operates three vehicle manufacturers, including Nanjing Fiat and Nanjing Iveco, producing 200,000 units annually. However, the future structure of the new NAC remains unclear, leaving many questions unanswered.
Industry insiders suggest that Chen Zhixin, executive vice president of SAIC, may take charge of Nanjing Auto. It is also reported that SAIC has decided to place Chen in charge of its own brand business, indicating a clear direction for the company’s long-term strategy.
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