(Yicai Global) July 5 -- The number of overseas mergers and acquisitions made by Chinese automakers is on the rise, but a lot of closed deals didn't have happy endings.
Chinese automobile and parts enterprises spent USD17.7 billion on 60 overseas M&As from 2013 to 2015, a Deloitte report shows. The number of transactions and amount shelled out both grew.
"Many Chinese auto manufacturers were full of enthusiasm at the begging of their M&As, but ended up having buyer's remorse," said Peng Bo, PwC strategic global partner and vice president of Greater China. "For now, only two M&As have been successful. Dongfeng Motor Corp. enjoyed an increase in market value after acquiring Peugeot SA [EURONEXT:UG], and Zhejiang Geely Holding Group Co.'s purchase of Volvo Group was also a success," he said.
"China has become the world's largest auto market," Peng said. "The straggling Chinese auto companies need to upgrade their ability to innovate, but because independent research and development requires a lot of money and time and entails risks, some companies have chosen to enhance their core competitiveness through overseas M&As."
Carmakers that have their own brands aim to enhance brand image through overseas M&As, he said. "As they have been around for a short time, they have yet to build up business goodwill among customers."
"On the whole, the effect of overseas M&As by Chinese automakers is not ideal," said Cui Shudong, secretary-general of the China Passenger Car Association. "The reasons are that Chinese automakers have less experience in overseas M&As, some of the deals are for money laundering, and China's car companies have an incomplete understanding of foreign laws and regulations and limited energy. The results are unsatisfactory."