Mainland car dealer China Yongda has drawn up an ambitious plan to add 25 dealership outlets this year, which it plans to fund with the HK$3.37 billion it seeks to raise in its Hong Kong initial public offering.
The second-largest trader of luxury brands such as Audi and BMW in eastern provinces said it also aims to become a leader in the used luxury car segment. Yongda expects used car sales to grow robustly and make up 25 per cent of total car sales in the next three to five years.
The Shanghai-based dealer said it plans to invest 50 per cent of the funds raised, or around HK$1.24 billion, to open new outlets and 35 per cent on possible acquisitions, while the rest will be used as working capital and to expand existing outlets.
Yongda's plans fly in the face of a flurry of news about thinning profit margins for dealers in the world's largest car market.
According to Gasgoo, an information portal for mainland's car industry, the profit margin of the top four mainland dealers was down to 7.3 per cent last year from 7.5 per cent a year ago.
Dealers, who did not want to be named, said they have had to offer huge discounts in past months to draw buyers as the economy slowed.
But Cai Yingjie, the vice-chairman and general manager of Yongda, said the company's 4S outlets had not seen losses. 'Our profit level has been well within our expectations and sales of high-end vehicles have grown at an annual rate of over 30 per cent. We expect growth to continue.'