Chinese auto giant rises from merger

ICONIC British brands MG and Rover will be reunited following a merger of two of China’s biggest local carmakers that has been valued at up to $2.2 billion.

The state-owned Shanghai Automotive Industry Corp (SAIC) – which is the Chinese partner of General Motors and Volkswagen – essentially swallowed its smaller (and also state-owned) rival Nanjing Auto in the deal, which was announced last Wednesday.

SAIC owns the rights to the Rover 25 and 75 models (which it produces under the Roewe brand because Ford bought the Rover name from BMW as part of the Land Rover deal), as well as the K-series engine.

However, two years ago it lost out on the MG rights to Nanjing, which has recently revived production of the MG TF at the historic Longbridge site in the UK. The company also began selling a re-badged ZT four months ago.

Having agreed to pay a reported $328 million for Nanjing’s automotive operations, the restructured SAIC finally has what it wanted – the rights to both Rover and MG, as well as the Longbridge site and a more modern production facility built by Nanjing in China with a capacity of 200,000 units a year.

SAIC is expected to inject more resources into Longbridge and move its existing R&D operation there.

All that stands in the way of the takeover is Chinese regulatory approval, which could mean another year before the biggest ever tie-up between local carmakers is finalised.

The Chinese government is believed to be in favour of domestic industry consolidations because larger operations will be more effective at competing with established global giants like GM, VW and Toyota.

Associated Press reports that there are about 150 carmakers in China, most of them small and financially weak.

A joint statement issued last week said that the ‘merger’ would create a “world-class auto company of an unprecedented scale in China”.