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In mid-December last year, the strategic department of FAW Group quietly visited Mount Emei to engage in deep thinking and research on the company’s five-year strategic plan. Their vision for growth is clear: aiming for 1.8 million units in sales in 2008, 2 million by 2010, and reaching 3 million by 2012. Throughout 2008, FAW secured 14 major projects from the National Development and Reform Commission, covering cars, commercial vehicles, and parts. Additionally, the Light Vehicle Company, a key project under FAW, was officially established in Qingdao on December 20, 2007. This rapid expansion clearly signals FAW’s intent to strengthen its position in the industry.
On December 11, 2007, news broke that Dongfeng had acquired Hafei Automobile. Whether through partial or full ownership, this move could potentially transform Dongfeng’s scale and capabilities, enabling it to catch up with FAW in both market presence and national industrial influence. The acquisition also opens the door for Dongfeng to develop its own brand and expand into the mini-vehicle segment. Strategically, this move could significantly boost Dongfeng’s standing in the industry.
FAW’s performance in 2007 was impressive—by November, the company had sold 1.4 million vehicles, 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 surpass both FAW and Dongfeng, producing over 2 million domestic vehicles annually and becoming a major player in China’s auto industry.
This growing competition likely accelerated the expansion strategies of both FAW and Dongfeng. The acquisition of Shangnan marked the first step in the government-led restructuring of the auto sector. According to the "Eleventh Five-Year Development Plan for the Automotive Industry," the goal is to consolidate the industry into 1–2 large-scale enterprises capable of producing more than 2 million vehicles annually and exporting over 10% of their output. This consolidation is seen as essential for long-term sustainability and competitiveness.
Capital leverage has become a critical opportunity for the Chinese auto industry. Through financial platforms, companies can enhance management efficiency, streamline organizational structures, and improve conditions for smaller firms and component manufacturers. More importantly, capital can help optimize resource allocation, drive industrial integration, reduce transaction costs, extend supply chains, and create new demand. These steps are crucial for companies aiming to grow stronger and more competitive.
According to officials from the National Development and Reform Commission, the U.S., Japan, and South Korea have only a few major automotive companies. In contrast, China has over 100 vehicle manufacturers, many producing less than 10,000 units annually. This fragmented landscape limits market power and leads to inefficiencies. To avoid waste and promote healthy development, government intervention becomes necessary.
China is transitioning from a manufacturing base for multinational corporations to a true production hub. Many international observers believe that China is on track to become the global center for automobile manufacturing in the 21st century. This shift will inevitably impact the capital markets.
While the saying “a small lever can move the entire planet†may be exaggerated, leveraging capital while managing risks is a vital opportunity for China’s auto giants. It’s not just an opportunity—it’s a mission to build a stronger, more sustainable, and globally competitive industry.