China may encourage auto majors to consolidate

The government may encourage its two largest automakers, Shanghai Automotive Industry Corp and China FAW Group Corp, to buy up rivals in order to revive the car industry, Bloomberg reported, citing people familiar with the plan. China hopes to whittle its 14 largest automakers down to 10 in order to transform state-owned firms into global players, creating two or three automakers with annual sales of 2 million vehicles by 2011. Dongfeng Motor Corp and Changan Automobile (Group) will be allowed to buy companies nationwide. Guangzhou Automobile Group, Beijing Automobile Industry Holding, Chery Automobile and China National Heavy Duty Truck Group will be allowed to make acquisitions in certain defined regions. The government wants auto sales growth to rise to 10% this year and in 2010, from 6.7% last year.