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In 2007, the Chinese auto industry underwent a significant period of restructuring, and it's not an exaggeration to say that the merger between SAIC and SAIC alone was enough to highlight this transformation. However, looking ahead, 2007 was just the beginning of a larger reshuffle. The real wave of consolidation had only just started, and the industry was heading toward a more competitive and efficient structure.
One of the key driving forces behind this change was the government’s strategic policy. From the early stages, the Chinese automobile industry policies emphasized the importance of building a few strong automotive companies. Later, the "Automobile Industry Development Policy" and the "Eleventh Five-Year Plan" reinforced this direction, aiming for a more concentrated and capable industry.
For instance, Article 3 of the "Automobile Industry Development Policy" set a target: by 2010, the industry should have several well-known brands in cars, motorcycles, and parts. Similarly, the "Eleventh Five-Year Plan" explicitly called for the state to lead enterprises to merge and reorganize, aiming to form a number of large-scale companies with annual production capacity of one million vehicles.
Although the exact number of these final enterprises wasn't specified, the general guideline was clear: "Through market competition and macro-control, achieve industrial restructuring and upgrading via strategic reorganization." This meant that forming large-scale enterprise groups through mergers was not just a trend, but a national strategic goal, expected to be completed by 2010 at the latest.
By 2008, which marked the third year of the Five-Year Plan, the restructuring strategy had entered a phase of intense implementation. The process moved from a planning stage in 2006, to a launch in 2007, and then into a full-scale execution after 2008—becoming the central theme of China's auto industry development.
Looking ahead, many experts believed that the global auto industry was moving toward consolidation. Reports suggested that companies producing less than one million vehicles annually would struggle to survive, while those with two million or more were also under pressure to restructure. This led to predictions that integration and reorganization were inevitable for Chinese automakers, especially those influenced by foreign technology and international competition.
Interestingly, 2008 also marked the 10th anniversary of the DaimlerChrysler merger, a major event in global auto history. At that time, similar reports from top consulting firms warned that only companies with sales above 1.8 to 2 million vehicles could survive. However, many of the mergers that followed did not live up to expectations, proving that predicting the future of the auto industry is not always accurate.
The question remains: who will emerge as the next big player in the global auto industry? While the Chinese market has over 100 car manufacturers, only a few are capable of competing on the global stage. In 2007, SAIC, FAW, and Dongfeng were already leading players, with production and sales exceeding one million units. Others like Guangzhou Auto, Beijing Automotive, and Changan may soon follow. What about Chery or Brilliance? Their positions in this evolving landscape remain uncertain.
While the government plays a strong role in guiding the industry, the success of mergers depends on more than just political will. A legal marriage doesn’t guarantee a happy life afterward. The quality of post-merger operations is what truly matters.
Another approach could be to let the market decide the direction of restructuring, allowing natural competition to shape the industry. This might lead to a more organic and sustainable evolution, rather than forced consolidations.
Ultimately, the path forward for the Chinese auto industry is still unclear. But one thing is certain: the era of small, fragmented companies is coming to an end, and the road to consolidation is just beginning.