• Sat
  • Jul 26, 2014
  • Updated: 6:05am

FAW Car rises 9pc on strong rating, asset-injection talk

PUBLISHED : Friday, 11 January, 2008, 12:00am
UPDATED : Friday, 11 January, 2008, 12:00am

Shares in Shenzhen-listed FAW Car rose by the most in three months yesterday after China Merchant Securities gave it a 'strongly recommend' rating due to rising sales and market speculation that the state-owned parent would inject its remaining assets into the carmaker.

The company, which is a partner with Mazda Motor Corp, closed 9.99 per cent higher at 22.68 yuan yesterday.

Jilin-based First Auto Works Group, the mainland's second-largest carmaker, is the majority owner of two listed car subsidiaries: FAW Car and Tianjin FAW Xiali Automobile. Market watchers speculate that the state-owned parent will inject its remaining assets into both subsidiaries, mainly joint ventures with Volkswagen and Toyota.

The subsidiaries would pay for these assets by issuing shares to the parent.

Tianjin FAW Xiali Automobile, which makes small economy cars, closed 9.55 per cent higher at 17.66 yuan yesterday, although sales of such cars slowed in the mainland last year.

A spokesman for Tianjin FAW Xiali said the company still operated well and there were no updates on the anticipated asset injection plan.

The China Merchant Securities report said FAW Car's Besturn brand had recorded good sales last year and the company would benefit from any asset injections.

The report did not note the latest sales figures, but FAW Car sold about 2,800 Besturn models in June and July last year, an increase of 100 per cent from 2006.

Market watchers are looking forward to more substantial mergers and consolidations between carmakers in coming years, especially after the successful tie-up between SAIC Motor Corp and Nanjing Automotive Group last month.

Meanwhile, there has been speculation in the mainland media that Dongfeng Motor Group, the mainland's third-largest carmaker, is in early negotiations with Avichina - one of the largest aircraft makers in the country.

Many think that Avichina will sell its two car units, Jiangxi Changhe Automobile and Hafei Automobile Group, to Dongfeng.

'It's always good to enhance synergies of carmakers in order to generate higher profits,' said Yale Zhang, director of Greater China motor industry forecasts at CSM Worldwide.

Mainland carmakers are struggling to expand operations in the fiercely competitive domestic market, even though the country has recorded surging sales in the past few years.

Volkswagen China, the largest global carmaker on the mainland, announced yesterday that it sold 910,491 vehicles last year, up 28 per cent after the company restructured its operations.

President and chief executive Winfried Vahland said Volkswagen China was confident it would break the one million mark in sales this year.

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