"The problem with China is we have too many players fighting each other at the lower end but none has the clout to compete globally," Zhang Xin, Guotai Junan Securities analyst told news agency Reuters. With more than 100 car manufacturers in the country, the Chinese auto industry is too fragmented and needs to be cleared up through in-country acquisition.
"There has been a lot of talk, or rather expectations, about Chinese snapping up U.S. auto assets, but the automakers first need to make sure they have the ability to turn those assets around," continued the analyst. Especially because most of them are used to build low-end vehicles and have no business experience with premium brands such as Volvo.
The Chinese government intends to encourage big domestic companies to take over the smaller companies, as it plans to cut the number of total Chinese auto groups to 10, two or three of which should have an output of more than 2 million vehicles each year.
The National Development and Reform Commission warned last week local producers to restrain themselves from buying struggling foreign brands. Even if the Chinese market seems to do well, despite the crisis, car sales growth slowed to a single digit figure in 2008, for the first time in a decade.