Domestic automakers join hands to seek breakthrough

After years of partnerships with foreign auto giants, China's domestic automakers have now begun to seek cooperation with local peers to sharpen their competitiveness in developing home-grown brands.

Two of China's major automakers, Guangzhou Automobile Group Co. (GAC) and Chery Automobile, announced Tuesday that they will form a strategic partnership and engage each other in a wide range of areas, including research and development, overseas business and production management.

The trans-provincial agreement is the first of its kind among Chinese local automakers amid government efforts to regulate the fragmented auto market through mergers and reorganization.

Under the agreement, the two sides will capitalize on their combined strengths to offset each other's weaknesses.

GAC, which has accumulated considerable management experience through its joint venture with foreign partners, has come up short in terms of brand-building and technological innovation, whereas Chery, a successful player in the low-end market, has been weak in terms of profitability.

Analysts said the new model may offer an effective breakthrough for Chinese automakers if successful, although there will be plenty of challenges and obstacles ahead due to varied regional interests.

For years, the government has been vigorously pushing for the restructuring of the fragmented auto market, which has been crowded with market players but few big-name brands.

As early as 2009, the State Council issued guidelines to streamline the auto industry. China is reportedly mulling new policies to encourage mergers and reorganization in the sector.

Statistics from the China Association of Automobile Manufacturers showed that in the first three quarters, domestic passenger cars accounted for 40.6 percent of total sales, down 1.7 percentage points from the same period last year.