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Hu Maoyuan relocated SAIC commercial vehicles
Shanghai Diesel has recently announced that its controlling shareholder, Shanghai Electric Group Co., Ltd., is in discussions with SAIC Motor to transfer all shares of Shanghai Diesel Holding that are currently held by Shanghai Electric. The company is also engaging with relevant government departments and regulatory bodies as part of the process.
Previously, Shanghai Electric had planned to sell 50.32% of its stake in Shanghai Diesel to SAIC Motor or its subsidiaries. The transaction price would be determined based on net assets, while also considering factors such as return on equity (ROE) and price-to-earnings ratios.
According to sources from the Shanghai Municipal Government, SAIC and Shanghai Electric are actively communicating with the State-owned Assets Supervision and Administration Commission (SASAC) and the China Securities Regulatory Commission (CSRC). Due diligence and audit evaluations are expected to follow, with a formal agreement likely to be signed by the end of the year under normal circumstances.
Shanghai Diesel is undergoing a major business transformation. While initial talks between SAIC and Shanghai Diesel began several years ago, they had not yielded significant results until recently. One of the key drivers behind this move is Shanghai Electric’s desire to re-enter the A-share market, as well as SAIC’s strategy to expand its commercial vehicle business through component manufacturers and increase overall production capacity.
Many truck companies, including China National Heavy Duty Truck Group, Shaanxi Heavy Duty Truck Group, and Futian Automobile, have their own internal support systems. However, these have not performed well in recent years, making it difficult for Shanghai Diesel to secure strong customers in the automotive parts market.
Currently, Shanghai Diesel produces around 60,000 to 70,000 marine engines annually, but only about 2,000 units for the automotive sector. This pales in comparison to its competitors.
Despite this, Shanghai Diesel plays a crucial role in SAIC’s plan to build a comprehensive commercial vehicle system. Over the past few years, SAIC has grown rapidly in the passenger car segment, with a focus on developing complete vehicle and component systems, especially key parts like powertrains and chassis.
This approach extends to commercial vehicles as well. According to Hu Maoyuan, key components are essential for SAIC’s long-term competitiveness. For commercial vehicles, the most important parts are the chassis and engine. While SAIC’s commercial vehicle subsidiaries, Shanghai Huizhong and Chongqing Hongyan, already have chassis systems, the group lacks a strong engine supplier. Although Nanjing Automobile has some engine capabilities, they are mainly used for existing models and do not include heavy truck engines.
After acquiring Shanghai Diesel, SAIC expects to shift more of its engine production towards commercial vehicles. A SAIC spokesperson noted that the company believes the integration will help turn Shanghai Diesel’s financial performance around and improve self-sufficiency, which would be beneficial in the long run.
SAIC has set ambitious targets for its commercial vehicle division. With the passenger car market becoming more saturated, the company is focusing on expanding its commercial vehicle business. A senior SAIC executive stated that after achieving first place in passenger cars and mini-cars, commercial vehicles must also reach the top.
Under Hu Maoyuan’s strategic plan, Shanghai Huizhong aims to produce 50,000 commercial vehicles by 2008, while Shanghai Shenwo is working on new energy buses to capture more market share. By 2010, the combined production and sales target is expected to reach 700,000 units, a key step toward becoming a global automotive leader.
While SAIC is currently the largest automotive company in China, its commercial vehicle business remains relatively small compared to FAW and Dongfeng. To close this gap, SAIC is investing heavily in building a robust commercial vehicle system.
In June 2005, SAIC President Chen Hong emphasized that commercial vehicles align with national economic cycles and infrastructure development trends, offering growth opportunities. Additionally, commercial and passenger vehicles have different market cycles, allowing for better economic balance within the group.
Recently, SAIC and IVECO signed an agreement to acquire 67% of Chongqing Hongyan Auto’s shares from CNHTC, with Sinotruk holding the remaining 33%. This partnership aims to build a 40,000-unit annual commercial vehicle production capacity.
Chongqing Hongyan offers high-end heavy trucks under the Hongyan and Steyr brands, and after the joint venture, SAIC will gain access to advanced technology and branding. An engine company will also be established in northern Chongqing to produce commercial vehicle engines.
Although SAIC now has a heavy truck business, it lacks scale. This is one reason why SAIC entered into a cooperation agreement with Nanjing Auto earlier this year, further strengthening its commercial vehicle portfolio.
With the acquisition of Chongqing Hongyan, Nanjing Iveco, and existing bus divisions, SAIC’s commercial vehicle lineup is becoming increasingly comprehensive.
SAIC estimates that after completing these acquisitions, its commercial vehicle production and sales capacity could reach 130,000–140,000 units annually. While still far behind FAW’s 170,000-unit capacity, the company is steadily growing.
To further strengthen its commercial vehicle division, SAIC announced in June 2007 that it would invest 210 million yuan over five years to establish a commercial vehicle technology center. This marks a significant step in the company’s long-term strategy.