Luxury car firm rolls out mainland expansion drive

Yongda looks to the country's emerging areas for growth as urbanisation takes hold

PUBLISHED : Monday, 26 November, 2012, 12:00am
UPDATED : Monday, 26 November, 2012, 12:55am


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Shanghai-based luxury car dealer China Yongda Automobiles Services plans to open and acquire more outlets in the country's less-developed regions amid a rapid urbanisation drive.

Vice-chairman Wang Zhigao said the company was placing its bet on growing demand for cars along with the quicker pace of urbanisation, a policy the new leadership hopes will stimulate domestic demand.

"Vice-premier Li Keqiang has said that urbanisation will become a major driving force [for the economy]," Wang said a tour of Yongda's Pudong showroom. "Therefore, it's necessary for us to expand nationwide to grasp the upcoming opportunities."

Li, who was elevated to No 2 in the Communist Party hierarchy earlier this month and is set to become the next premier in March, is a strong advocate of industrialisation and urbanisation.

In People's Daily last week, Li said "urbanisation under scientific planning" would be a huge growth engine for the national economy. Yongda, which completed an initial public offering (IPO) in Hong Kong in July, now has 66 outlets, most of which are based in the China's affluent east.

Wang said the company, which has 40 outlets in Shanghai alone, was determined to expand into the southern and central parts of the mainland through new store openings or acquisitions.

"Organic growth will be our focus as we develop the businesses," he said. "In those areas where we don't have a presence, acquisitions of proper targets will also be a choice."

In China, where government policies often play a major role in businesses, company bosses normally follow the government directives to chase growth.

In the car sector, the government has the clout to largely drive up the market by cutting taxes or offering subsidies on car purchases.

In 2009, Beijing halved the consumption tax on cars with engines of up to 1.6 litres to 5 per cent. Car sales jumped 46.2 per cent that year, surpassing the United States for the first time to become the world's largest car market.

Yongda, which sells luxury and ultra-luxury brands including BMW, Infiniti, Land Rover and Porsche, raised HK$1.24 billion in its Hong Kong IPO and said it would use the proceeds to fund expansion across the mainland.

The mainland's car market has showed signs of slowdown in the past two years, following a hefty growth of 32 per cent in 2010.

In the first 10 months of this year, mainland car sales rose 3.56 per cent to 15.7 million units, according to the China Association of Automobile Manufacturers.

However, business advisory firm AlixPartners predicted the world's largest car market could still grow as much as 12 per cent in the next four years driven by rising wealth.