SAIC, Nanjing Auto to merge in Oct

Nanjing Automobile Corp (NAC) is moving closer towards Shanghai Automotive Industry Co., Ltd. (SAIC).after two of China's giant auto makers signed a letter of intent to to discuss "comprehensive cooperation" between the two companies through cooperation and restructuring in July.

The two sides will come up with a detailed plan after the due diligence process is completed by October. SAIC, the larger and more profitable of the two has sent a team of legal and financial advisers to visit Nanjing Auto to find out how much it can benefit from the cooperation.

If the merger is realized, competition between the two MG Rover, developed by Nanjing Auto, and the Roewe by SAIC could be eased. SAIC started selling its Roewe mid-sized sedan in March, while Nanjing Auto will launch a MG 7 sedan in the market in the second half of this year. Both models are based on the Rover 75 from collapsed British carmaker MG Rover.

It is also reported that SAIC plans to spend RMB 10 billion to roll out more than 30 models and aims to sell 200,000 of its own-brand cars a year by 2010. NAC is building a production capacity of 200,000 cars, 250,000 engines and 100,000 gearboxes in eastern city of Nanjing. SAIC sold about 840,000 vehicles in the first half, up 23% from a year earlier, while NAC's sales went down 5.8% to 105,050 units.