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On March 28, Tianjin FAW Xiali Automobile Co., Ltd. announced that the sixth meeting of the fourth session of its board of directors had approved an agreement between China FAW Group and itself regarding the transfer of equity in FAW Huali (Tianjin) Automobile Co., Ltd. This came just 10 days after the Tianjin Property Rights Center posted the transfer details on March 18, revealing that FAW Huali was offering 100% of its shares at a listing price of 300,000 yuan.
The announcement also stated that the first extraordinary general meeting of the company in 2008 would be held on April 14 to discuss this proposal. On April 1, shares of FAW Xiali (code 000927) opened at 7.9 yuan, reached a high of 8.04 yuan, and closed at 7.11 yuan.
Analysts believe there is little chance of other companies joining the acquisition, as the deal seems to favor FAW Xiali. However, stakeholders remain cautious. A company representative mentioned that while the transfer is still under consideration, the final decision is expected on April 15, with many variables remaining before the outcome is clear.
Some industry insiders have criticized the claim that FAW Huali was prioritized for sale to FAW Xiali, calling it “unreasonable and unscientific.†According to internal documents, FAW Huali is located near the FAW Xiali plant and has a long history, having once been a joint venture between Tianqi Group and Malaysia’s Golden Lion Benben Industry. It later became a wholly-owned subsidiary of FAW Group.
Despite its past, FAW Huali has struggled in recent years. As of December 31, 2007, its total assets were 65.3 million yuan, but its net assets were negative 13.6 billion yuan. The company's main business income was 71.6 million yuan, with a net loss of 13.15 billion yuan.
Industry experts suggest that FAW Huali lacks market appeal and operational vitality. However, despite its low valuation, some believe its production facilities and “shell resources†could attract buyers looking to expand or revitalize their operations. An expert from Fudan University noted that such low-value transfers often involve struggling companies requiring capital injection to survive.
FAW Group officials highlighted that the transfer comes with strict conditions, including the requirement for the buyer to maintain operations, ensure workforce stability, and build a 150,000-vehicle production base within two years. These criteria limit the pool of potential bidders.
This move reflects a broader trend in China’s auto industry, where mergers and acquisitions are accelerating. Examples include Guangzhou Automobile Group acquiring Peugeot’s stake for 1 yuan in 1997 and Shenfei Hino selling 46% of its equity for just 1 yuan earlier this year. Experts predict that with increased competition and openness, more consolidation will occur.
China’s automotive sector remains highly fragmented, with over 130 manufacturers, most of which struggle to reach even 10,000 units in annual sales. Industry reports indicate that companies producing less than one million vehicles annually may not be sustainable, and those below two million face restructuring pressures.
Mergers have already begun, with major players like Dongfeng, Changan, and SAIC forming new partnerships. Yet challenges remain, particularly due to local protectionism and the political-economic importance of the auto industry. Breaking these barriers is seen as key to unlocking future growth.