SHANGHAI — — Chinese pickup truck maker Hebei Zhongxing Automobile Co. is in talks with General Motors Corp. and major Chinese auto maker FAW Group to explore opportunities for co-operation, including possible equity ties, a source close to the situation said on Thursday.
"Consolidation is inevitable in the Chinese auto market, which now has more than 100 players, and a company of Zhongxing's size makes a good takeover target or joint venture partner," the source told Reuters.
"Zhongxing is holding talks with several potential partners including FAW and GM to seek co-operative opportunities, including possible equity ties, but nothing has been decided at the moment," one of the sources said.
A Zhongxing spokesman could not immediately be reached for comment and an FAW executive declined to comment.
General Motors
GM's China spokesman Henry Wong also had no direct comment on the matter.
"We are a big auto company so we are always out there looking for opportunities and in discussions with everybody around the world. I don't actually have information on discussions in China," Mr. Wong said.
Zhongxing, a second-tier player in China's auto industry but a major maker of pickups and sport-utility vehicles, expects to sell about 45,000 vehicles this year, including 15,100 overseas. It sold about 36,000 units last year, with exports at roughly 10,000 units.
The source gave no specifics about Zhongxing's discussions with GM, which runs two ventures with China's top auto maker SAIC Motor making cars and minivans.
"The talks are still exploratory and the two parties are not excluding any possibilities," the source said.
GM, the largest U.S. car maker, is also a dominant player in the world's second-largest car market, but its China vehicle sales growth slowed to 12.7 per cent in the first half of this year from 18.5 per cent for all of 2007, lagging rival Volkswagen AG's 23.3 per cent first-half sales growth. The Volkswagen figures also included Hong Kong and Macau.
China's fragmented auto industry is badly in need of consolidation and the government hopes to establish three to five large auto groups that could compete globally.
FAW Group, a China partner for Volkswagen and Toyota Motor Corp. and the parent company of FAW Car, is under pressure to expand after SAIC Motor's $286-million (U.S.) merger deal with Nanjing Automobile Group late last year, creating a national auto champion.
Analysts said Zhongxing's pickups and sport utility vehicles could be a welcome addition to the commercial vehicle portfolio of FAW, which is strong in medium- to heavy-duty trucks.
Zhongxing has put plans for a $300-million plant in Mexico near the U.S. border on hold after it terminated its partnership with Chamco Auto, a U.S.-based vehicle importer.
