Almost at the same time as the acquisition of Nanjing Steam Assets, SAIC Group has laid a key player in the strategic layout of its commercial vehicles. After taking Shangchai’s shares to His Majesty, SAIC completed the integration of the entire vehicle to the engine business in the weak commercial vehicle sector.
On January 3, Shanghai Automotive and Shanghai Diesel Stock Co., Ltd. issued an announcement at the same time, claiming that Shanghai Automotive spent RMB 92,342 million to acquire 50.32% of the shares in Shanghai Diesel Holdings held by Shanghai Electric. At this point, the suspension of the last five months of the Shangchai shares, was included in Shanghai Automotive.
After the acquisition was completed, Shanghai Automotive solidified the foundation for the development of commercial vehicles. Simultaneously, Shanghai Diesel Electric finally ended its state of singles and achieved linkage with the downstream companies. Both sides pushed a door for cooperation and win-win. Affected by this good news, on January 3, Shangchai’s shares closed at a daily limit of 19.99 yuan.
SAIC Layout Commercial Vehicles
The announcement shows that the Shanghai Stock Exchange has transferred 242 million shares of Shanghai Diesel to Shanghai Automotive, and the price of each stock is less than 3.82 yuan. There is no doubt that this deal is a good deal for Shanghai Automotive.
In fact, despite SAIC's repeated use of the passenger vehicle market in recent years, it has never been successful in the field of commercial vehicles with higher profit margins. According to the statistics of the China Association of Automobile Manufacturers, in the first 11 months of 2007, SAIC Motor Corporation’s passenger car companies ranked top in the national passenger vehicle sales rankings, among which SAIC-GM-Wuling, Shanghai GM, and Shanghai Volkswagen ranked first and third respectively. In the top ten sales of commercial vehicles, only Nanjing Automobile, which has just been incorporated into SAIC, ranked ninth with a market share of 2.97%.
Hu Maoyuan, chairman of SAIC Motor, has realized that SAIC Motor urgently needs to accelerate its pace in the field of commercial vehicles where profits are gradually rising, under the circumstances that passenger car profits continue to decline. In the first 11 months of 2007, of the 1,386,500 vehicles sold by SAIC alone, only 82,600 were commercial vehicles and sales accounted for only 5.96%, which is much lower than domestic large-scale automobiles such as FAW Group, Dongfeng Group and Chang'an Group. group.
In order to speed up the strategic layout of commercial vehicles, in 2007 SAIC began a series of dense acquisitions and restructuring. At the beginning of the year, SAIC Motor's Commercial Vehicle Division was established. In June, SAIC Iveco Hongyan Commercial Vehicle Co., Ltd. was established through the reorganization of Chongqing Heavy Duty Truck and established a production base for medium and high-grade heavy trucks. In July, it reached an agreement with Yuejin Group, an important base for domestic light commercial vehicles. In August, the news of the acquisition of Shangchai’s shares surfaced. Shangchai’s shares issued a suspension announcement saying “there will be resumption of trading after the cooperation matters are clearâ€. In December, through the integration of Nanjing Auto, the competitiveness of light trucks and light passengers was enhanced. "Shangnan Cooperation" Yu Yinping, Shanghai Automotive has quickly completed the acquisition of the Shangchai shares.
The SAIC, which is anxious to complete commercial vehicle short-boarding, is looking at the traditional diesel engine sold by the company for more than 10,000 units a year, as well as natural gas engines that have been continuously developed in recent years.
At the same time, SAIC has deployed a careful fundraising plan for the successful completion of the above acquisition and restructuring. On August 10, 2007, Shanghai Automotive carried out a major financing plan in the capital market after the completion of the listing of the entire vehicle business through targeted distribution in 2006. The company plans to issue convertible warrants and bond separation transactions of up to RMB 8 billion. Corporate bonds, including one-fourth of the total funds raised, will be used to acquire mergers and acquisitions related to commercial vehicle R&D, manufacturing platforms, and parts and components business closely related to the development of commercial vehicles to ensure SAIC Group's "Eleventh Five-Year Plan" goals. carry out. By 2010, SAIC Motor’s own brand automobile production will reach 600,000 vehicles, including 200,000 passenger vehicles and 400,000 commercial vehicles. Commercial vehicles will become strategic support for SAIC's own brands.
Shangchai cooperation for survival
"For SAIC, in the next few years, commercial vehicles will be a key part of SAIC Motor's development. As a professional diesel engine manufacturer, Shanghai Diesel Engine Co., Ltd. has significant implications for the development of commercial vehicles." said Zhang Xin, an analyst at Guotai Junan Securities. For Shangchai shares, it is also a historic opportunity.
With more than 60 years of history, Shanghai Diesel Engine Co., Ltd. currently has a complete product structure with five series and more than 300 variant products. It is used for construction machinery, trucks, passenger cars, etc. It is the most important power supplier in the domestic automobile and construction machinery industry. One, with a strong overall engine research and development capabilities.
However, due to the lack of support from vehicle manufacturers, it is impossible to form linkages with the downstream industries and the market for vehicle diesel engines is getting smaller and smaller. Among the 22 diesel engine manufacturers that were counted by the China Association of Automobile Manufacturers in the first half of 2007, Shangchai became one of the five companies with a year-on-year drop in output, while output of other 17 companies showed a year-on-year increase. In 2007, when the domestic heavy truck and passenger car markets rose sharply, Shangchai’s sales fell.
"After the completion of the acquisition, Shanghai Diesel's advantages in the current construction machinery market continue to play. With the development of the automotive diesel engine field, Shanghai Diesel Engine will gradually shift from the current construction machinery market to the automotive market and construction machinery market. Huang Qiang, director of the Shanghai Automotive Board of Directors, told the newspaper.
According to the planning of Shanghai Auto, the controlling shareholder, after the acquisition is completed, the scale of production and sales of Shanghai Diesel's shares will be significantly expanded. Shangchai will have a stable supporting relationship that was previously unattainable as an independent engine enterprise and is expected to receive SAIC's capital, experience and even professional talents.
In accordance with the development goals, in the future, Shangchai will continue to help SAIC to develop its diesel engine products on the premise of maintaining its existing main business, provide commercial engines for SAIC Motor Group after NAC, and assist SAIC to become a sedan and commercial vehicle. Car, passenger car and core parts in one large comprehensive automobile manufacturer.
Shuffle commercial vehicle "core" pattern
Once Shangchai relies on the rise of SAIC Motor, the competitive landscape of the domestic internal combustion engine market may be rewritten again.
In the past few years, Shangchao dominated the market first, followed by Xichai and Daichai. Now Yuchai and Weichai lead the automotive diesel market. After several rounds of reincarnation, Shang Diesel, who had once lost the opportunity for the development of a car engine, has been able to reshape the brilliance after the joint vehicle company has solved the product sales.
In accordance with this development trend, the number of affected trucks had a large proportion of Weichai in the truck products of SAIC Huizhong and SAIC Iveco Hongyan. After SAIC has its own power system, together with the 100,000 engine capacity of SAIC Fiat Hongyan, Weichai may be excluded from the entire SAIC Group commercial vehicle market, losing part of its market share.
The Shangchai reorganization will also have indirect effects on Yuchai, FAW Xichai, and Dongfeng Cummins. In fact, diesel engine manufacturers that are independent of vehicle companies are under severe test of survival. At present, many multinational companies have established wholly-owned and joint venture R&D centers in China. According to statistics, the top 7 domestic truck sales have 5 self-built or joint venture engine plants, accounting for 71.4%. In August 2007 alone, Beiqi Foton and Cummins Corporation formed a joint venture, Dongfeng Chaochai cooperated with U.S. International Corporation, German Mann intends to establish a joint venture with Weichai, Shaanxi Auto and Cummins jointly established an engine company to put into operation, FAW and German Road. Enitz established a new joint venture engine plant and other intentions.
In fact, the ready-to-fly Shang Chai took the SAIC speeding express train and it was not far away from the re-emergence. However, after a large-scale merger and reorganization, from the micro- and light commercial vehicles, to heavy commercial vehicles, medium-heavy engines, SAIC how to achieve the linkage of the entire industrial chain of commercial vehicles to become the key to promoting the construction of commercial vehicle systems.
SAIC Fiat Hongyan Powertrain Co., Ltd., which previously held 30% of SAIC Motor’s shares, has been established. The joint venture between SAIC Motors and Italy’s Fiat Group will begin production of heavy-duty engines in October 2008 with an initial planning capacity of 100,000 units. 70,000 units are heavy-duty diesel engines and will compete with Shanghai Shangchai in the market. However, for this contradiction, Zhang Xin analyzed that in the future, SAIC Motor will most likely inject this part of assets into the platform of SAIC Motor Co., Ltd. to realize the integrated operation of engine assets.
Compared with the Shangdong assets of SAIC, how the Shangchai’s products play a role in SAIC’s huge machine seems to be more of a concern.
View related topics: SAIC commercial vehicle expansion