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China aims to cut auto groups to 10 from 14
Updated: 2009-02-24 10:51

A Chinese government plan to strengthen the automobile sector aims to reduce the number of major auto-making groups through mergers to 10 at most from 14, the official China Securities Journal reported on Tuesday.

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The plan, approved by the Cabinet this month, also says the government will provide subsidies worth 5 billion yuan ($732 million) between March and the end of 2009 to aid purchases of autos in rural areas, the newspaper quoted unnamed sources as saying.

China is drafting a string of policy packages to help industries, ranging from steel to logistics and consumer goods manufacturing, ride out the slumps in the Chinese and global economies.

The auto plan aims to stabilize demand for cars so that China's total vehicle sales and production this year both exceed 10 million vehicles, and grow an average 10 percent annually over the next three years, the newspaper said.

Total vehicle sales, including cars, buses and trucks, rose just 6.7 percent to 9.38 million vehicles last year, according to the China Association of Automobile Manufacturers. Sales plunged 14.35 percent from a year earlier in January 2009.

The newspaper said China would use fiscal policy and administrative measures to encourage more sales of low-emission vehicles, replacement of old cars with new ones, development of consumer financing for car purchases, and increased government procurement of domestically developed models.

It would seek to reduce the 14 major auto groups, which together account for over 90 percent of the market, to 10 at most, though the newspaper did not give a timetable or name the groups that might be involved in the consolidation.

Ultimately, the government wants to see two or three big Chinese groups with annual production each exceeding 2 million vehicles, plus four or five groups making over 1 million vehicles, the newspaper said. Such consolidation would help firms develop new products while cutting costs.

The central government has been encouraging auto mergers for years but has had little success, partly because local governments own major stakes in most Chinese auto makers and often seek to keep them independent. A merger in late 2007 between top Chinese car maker SAIC Motor and much smaller Nanjing Automobile Group was one deal to go through.

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