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China's SAIC and GAC seek safety in numbers as car sales fall

Automakers form partnership spanning connected cars and services

Guangzhou Automobile Group's vehicle sales fell 4% on the year for the first 11 months of 2019. (Photo by Takashi Kawakami)

GUANGZHOU -- Chinese carmakers SAIC Motor and Guangzhou Automobile Group, or GAC, have announced a wide-ranging partnership to weather a slumping domestic market.

The five-year comprehensive strategic tie-up will include auto financing and insurance, as well as developing technologies for new-energy vehicles and connected cars.

SAIC and GAC will develop new businesses together, such as car sharing, as well as overseas markets. They seek to capture new demand to offset the risks posed by declining auto sales at home.

State-owned SAIC is China's largest automaker by new-vehicle sales, including joint ventures with Volkswagen and General Motors. But sales volume sank 13% on the year to 5.54 million vehicles for the January-November period.

While GAC is performing well at joint ventures with Japanese automakers Toyota Motor and Honda Motor, the Guangzhou-government-owned company's own brand has struggled. The group's overall January-November sales fell 4% to 1.88 million autos.

The China Association of Automobile Manufacturers sees the nation's auto market contracting for a second straight year in 2019, by between 8% and 9% to fewer than 26 million vehicles.

Yet the market is saturated with competing automakers, and excess production has emerged as a problem. Total capacity reaches at least 35 million autos, according to local media.

Chinese automakers could redraw the industry landscape through comprehensive collaborations. FAW Group, Dongfeng Motor Group and Chongqing Changan Automobile signed a similar deal in December 2017.

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