Mainland carmakers Guangzhou Auto and Chery in bid to beat slow market

Guangzhou Automobile Group, the Chinese partner of Japan's Toyota Motor and Honda Motor, formed an alliance with fellow mainland firm Chery Automobile yesterday to share core technology and management experience in an attempt to boost competitiveness in a slowing market.

The deal is the first of its kind between two mainland carmakers in the world's largest car market that is still dominated by foreign brands.

Under the agreement, the two companies will work together on vehicle development and share engine and key component technology. They will also co-operate in energy-saving and new-energy vehicle development, international business as well as manufacturing and management processes. The deal does not involve equity stakes.

"The Chinese economy has slowed down this year and the market demand has been weak. This has pressured us to upgrade our business structure and seek sustainable growth," Zhang Fangyou, the chairman of Guangzhou Auto, said.

Guangzhou Auto, the sixth-largest car manufacturer in the country, has been hit hard this year by sluggish sales and anti-Japanese sentiment caused by a territorial dispute over the Diaoyu Islands in the East China Sea.

The sales of Guangzhou-made Toyota and Honda vehicles, which contributed 94 per cent of the company's profits last year, fell 40 per cent and 54 per cent respectively in September, according to industry statistics.