China wants to boost its automobile industry by reducing the number of companies in the sector through mergers and promoting two or three carmakers to become the dominant players.
The government has unveiled its plans for auto industry reform two months after it approved stimulus measures, including tax cuts and subsidies, to help carmakers survive the global economic downturn.
The State Council, or cabinet, said on its website late on Friday that by 2011, it wanted to cut the number of major domestic automobile makers, responsible for 90% of domestic sales and output, from 14 to 10.
Under the scheme, two or three companies would be the industry heavyweights, capable of producing more than two million units a year, while four or five others would have annual output capacity of one million units.
It named four groups as possible nationwide leaders that should consider expansion through mergers and acquisitions -- FAW, Dongfeng Motor Corp, SAIC (Shanghai Automotive Industry Corp) and Chang'an Auto.
China wants to churn out 10 million vehicles this year, and has set a target of a 10% rise in annual output for 2009-2011.
According to the China Association of Automobile Manufacturers, production last year reached 9.34 million units, up 5.21% from 2007.
In 2008, automobile sales growth shrank with an increase of just 6.7%, the first single-digit expansion since 1999 in a market used to growth rates of more than 20%.
But in February, China beat the United States to become the world's largest automobile market for a second consecutive month, with sales up nearly 25% from a year earlier, buoyed by the government's stimulus measures.