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In mid-December last year, the strategic department of FAW Group secretly visited Mount Emei to engage in deep thinking and research on the company's five-year strategic plan. Their vision is clear: aiming for 1.8 million units in sales by 2008, 2 million units by 2010, and a bold target of 3 million units by 2012. Throughout 2008, FAW secured 14 major projects from the National Development and Reform Commission, covering cars, commercial vehicles, and parts. Meanwhile, the establishment of FAW Light Vehicle Company in Qingdao on December 20 marked a significant step in their expansion strategy. It's evident that FAW is accelerating its growth to maintain its competitive edge.
On December 11, the news broke that Dongfeng had acquired Hafei Automobile. Whether it was a partial or full acquisition, this move could lead to a qualitative transformation not only in the group’s ranking but also in China’s overall automotive industry structure. It could help Dongfeng build its own brand and expand into the mini-vehicle segment. In terms of scale, this could bring Dongfeng closer to FAW’s level overnight.
FAW’s performance in 2007 was impressive. By November, they had already sold 1.4 million units, with an annual total of 1.43 million. However, this lead was soon challenged by the rise of “Great Shangqi,†the powerful alliance formed after the cooperation between SAIC and NAC. With full integration, SAIC is expected to quickly reach a production capacity of 2 million domestic vehicles annually, surpassing both FAW and Dongfeng.
This rapid development likely pushed FAW and Dongfeng to speed up their expansion strategies, driven by the threat posed by these growing competitors.
The Shangnan acquisition was the first domino in the government’s push to restructure the auto industry. The "Eleventh Five-Year Development Plan" aimed to consolidate the sector into one or two large-scale enterprises capable of producing over 2 million vehicles annually and exporting more than 10%. This goal is becoming a key focus for the Chinese auto industry.
Capital leverage is now a major opportunity for the Chinese auto sector. Through capital platforms, companies can improve management, optimize structures, and enhance the environment for both private and small-to-medium enterprises. More importantly, it allows for efficient resource allocation, industrial integration, and cost reduction. This helps extend the supply chain, create new demand, and drive growth.
According to officials from the National Development and Reform Commission, the U.S., Japan, and South Korea have only a few major automakers. In contrast, China has over 100 vehicle manufacturers, many producing more than 10,000 units annually. With such a fragmented market, consolidation is essential to avoid inefficiency and resource waste. Therefore, policy intervention is necessary to guide the industry toward a more sustainable future.
China is transitioning from a global manufacturing base to a true production hub. Many international observers believe that China will become the automobile manufacturing center of the 21st century. This economic shift is already being reflected in the financial markets.
While the phrase “finding a fulcrum to shake the entire planet†may be exaggerated, leveraging capital and managing its risks is a critical opportunity for China’s auto giants. It's not just an opportunity—it's a mission to shape the future of the industry.