Two of China's major car manufacturers have merged to create Guangzhou-Changfeng Auto, with the goal of producing 500,000 cars per year.
Guangzhou Auto has bought a controlling 29 per cent of Changfeng Motors. Changfeng Motor Group is the second biggest shareholder in the company, holding 22 per cent of the shares.
The deal will add sport-utility vehicles to Guangzhou Auto’s product line-up, which already includes cars made through ventures with Toyota and Honda.
Analysts say the deal is beneficial to both companies as Changfeng lacks capital and Guangzhou Auto is short of SUVs. Changfeng is part-owned by Mitsubishi.
In addition, the new Guangzhou-Changfeng Auto company has pledged to invest about 10 billion yuan ($1.47 billion) in its facilities in the Hunan province over the next five years, so that it has the capacity to build 500,000 cars a year.
The move is consistent with China’s push to combine some of the nation’s roughly 130 automakers to help build stronger companies that can compete globally.