The acquisition of Nanjing by SAIC reflects the recognised need to combat falling margins - to grow scale, obtain operational efficiencies and leverage (over suppliers and distributors) and rationalise a diverse and effectively inefficient automotive market created under very different era conditions, even if not actually that long ago.
Both industry and the Chinese authorities recognise that now is the time for structural reform, ready to create a new, stronger sector by which to fulfil commercial and national ambitions. The governmental call for the sector consolidation of domestic auto-makers was made some time ago, and today the process begins.
Of most topicality to western observers was of course the recent announcement of SAIC's acquisition of Nanjing. Given the mutual roots of Rover/Roewe & MG the eventual re-connection of the seperate entities was a natural conclusion to draw for the process of value extraction. Given that the Rover 75 engineering and manufacturing fundamentals were the shared interest, it was only really ever a matter of time before the Roewe & MG twins were operationally unified once again. Although Chen Hong (SAIC's President) previously downplayed his company's interest in its rival, it was plain to see the ploy. (Yuejin Motor Group Corp, Nanjing MG's previous owner, still operates as a holding company for other enterprises).
But this is but a singular high-profile case in what we imagine will be an ongoing story, until the sector (suppliers, VMs, distributors & dealers) re-balance to equilibrium. In the meantime, each of the myriad of large, medium and small operators will be jostling for best position as either buyer - seeking under-valued opportunities - or seller - seeking to window dress themselves as much as possible to attract ideally over-value bids.
Beyond the spectrum of trade buyers is of course the potential for domestic Chinese and Chinese-Foreign alliance private equity interest, seeking synergistic both 'horizontal' and 'vertical' purchases to encourage sales unit volume and/or value-chain integration efficiencies.
The real question is what shape will the consolidation process take and what will be driving it?
Regional Politics? Product Similarity? Product Disparity? Financial Liquidity? Corporate Influence? Forward Integration? Backward Integration? As ever there are many many factors that will influence the process, and different circumstances will be directed by different affectors.
Industrialists and bankers will be evaluating if there are indeed 101 ways to skin this cat.