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EOS Car Makers In China

BEIJING : Chinese car giant Shanghai Auto and the country's oldest carmaker have agreed to join forces in the highly competitive market, state press said Saturday.

Shanghai Auto (SAIC) and Nanjing Automobile Corporation (NAC) will set up a working group to study how they could work together, and look at reorganising their shares, the papers said.

The move comes amid concern among Chinese authorities about overcapacity in the country's car industry.

Beijing wants it to restructure so that only the biggest carmakers and those that are growing rapidly remain.

Chinese media said authorities were also concerned about competition between the two groups, which share the same technology, derived from the former British carmaker MG Rover.

NAC bought the rights to develop the historic MG, Austin Healey and Healey models from the bankrupt group, once makers of the iconic Mini and Jaguar, in July 2005.

SAIC recorded China's highest car sales last year with 1.34 million vehicles.