India, Russia may follow China in autos M&A

LONDON/PARIS Tue Nov 16, 2010 1:36pm EST

Head of Global Automotive and Steel at Moelis & Company, Meyrick Cox, speaks during the Reuters Auto Summit in London November 16, 2010. REUTERS/Benjamin Beavan

Head of Global Automotive and Steel at Moelis & Company, Meyrick Cox, speaks during the Reuters Auto Summit in London November 16, 2010.

Credit: Reuters/Benjamin Beavan

LONDON/PARIS (Reuters) - Indian and Russian companies may follow China's lead in doing overseas deals to help grow their automotive industries, Meyrick Cox of Moelis & Co told the Reuters Global Autos Summit on Tuesday.

China's car industry has spent a decade augmenting its technology, brands and distribution capabilities through alliances, consulting tie-ups and overseas takeovers, culminating in Geely's $1.5 billion purchase of Volvo from Ford (F.N) this year.

Cox, speaking at the London office of Reuters, said Russia's automotive industry now faced "the same issue China had ten years ago."

Despite joint ventures such as Lada maker AvtoVAZ's (AVAZ.MM) tie-up with Renault SA (RENA.PA), it and rivals such as GAZ (GAZA.RTS) were under "very heavy pressure from the Kremlin" to modernize Russia's car industry, he said.

"Whether they can do that through paying consultants to help develop things, or their own work, or by buying things, is an open question, but I think it's entirely possible we would see them buying things if there are assets around to buy."

Similarly, Cox said Indian conglomerates such as the family owned Hinduja Group or Mahindra Group, whose Mahindra & Mahindra (MAHM.BO) unit is the country's top utility vehicles maker, could pursue overseas deals that would help them better tap a domestic market of more than 1 billion people.

China's state-controlled giants Dongfeng and FAW also remained keen to boost their know-how, branding and footprint.

But, he said, all face the same problem.

"There aren't an awful lot of assets left to buy," Cox said. "The car industry tends to restructure itself about once every 10 years in ownership terms, and we've just had, I guess, two years or so of that."

That echoes Geely chairman Li Shufu, who told Reuters in an August interview that it was "very difficult to find a good brand like Volvo you can buy," and joked that Chinese companies would be interested in Daimler AG's (DAIGn.DE) Mercedes unit were it for sale.

Cox was a key adviser to Geely at Rothschild ROT.UL. He then left the family-owned bank for Ken Moelis's eponymous, 3-year old outfit to be head of global automotive and steel.

Cox said China's carmakers were focused on serving their domestic market, the world's biggest. "It's a mistake to think that this is an export-driven rush, in the same way as the Japanese car manufacturers focused on exports," he said.

"The focus is being able to design and build cars in China for Chinese people."

But with top Chinese automaker SAIC Motor Corp (600104.SS) launching its "Roewe" cars in Europe, Cox said Chinese carmakers would begin to make inroads into developed markets.

"I read every now and again it's going to be 10 or 20 years before we see Chinese cars over here. Nonsense. We're going to see them here in the next five years, and they're going to be built just as well as mass-market cars here are," he said.

"The manufacturers who think it's going to be 10 or 20 years away are going to have a very unpleasant surprise."

(Reporting by Quentin Webb; Editing by Jane Merriman)