SAIC takes Nanjing

Two of China's state-owned carmakers -- Shanghai Automotive Industry Corp (SAIC) and Nanjing Automobile Corp (NAC) -- signed a long-awaited deal in Beijing this week with a view to forming a partnership.

According to a joint statement, the companies will form a working group to discuss "possibilities and programs for all-round collaboration" in vehicles, spare parts, auto trading and services. SAIC Motor will pay 2.095 billion yuan ($A327.7 million) for the vehicle and core auto parts operations of Nanjing Auto, owner of MG Rover.

The Rover Group brands purchased by Nanjing and SAIC in the lead up to, and after, the British company's collapse will continue to develop in different market directions, according to Chen Hong, vice president of SAIC. The MG will also be sold outside of China, he said.

"In the future, MG vehicles will be more sporty and Roewe will emphasize elegance," said Hong.

SAIC will take over the Longbridge (UK) assembly plant used by NAC to produce MG roadsters, in an effort to build sales in Europe. SAIC bought intellectual property rights from Rover to sell the 25 and 75 models in China in 2005.

"The British business will become SAIC's new platform for overseas markets and a window of SAIC toward Europe," said Hong.

Analysts suggest the SAIC-NAC merger is the start of others to come among China's fragmented auto industry. The partnership is seen to strengthen efforts for the mostly government-backed carmakers to take on the might of international auto giants.

SAIC is also expected to combine its commercial vehicle interests with Nanjing Auto's medium-duty trucks as well as light buses amid cooperation with Fiat and Iveco.

The passenger car venture between Fiat and Nanjing was also terminated this week, with the Italian company agreeing to sell a 50 per cent stake to NAC.

With speculation that Indian company Tata will likely take over Jaguar and Land Rover, and perhaps with it the Rover name, SAIC will likely hasten plans to make the up-spec Roewe saloons available sooner rather than later.

Analysts say the deal is a good sign for the UK auto industry, because China's biggest automaker SAIC is more likely to have the resources required to resurrect the MG Rover brands, much like BMW did for MINI.

SAIC also has a partnership deal in China with Volkswagen.