China's Lentuo in talks to buy car dealers

Lentuo International, a Beijing-based retailer of Volkswagen and Toyota cars, said it is in talks to buy dealers to expand its used-car business as mainland consumers replace cars more frequently.

The company, which has a venture with Osaka-based Itochu, is "making good progress" and is in discussions with three to four potential targets, said founder and chairman Guo Hetong. Used cars are typically in higher demand in the mainland's smaller cities, where incomes are lower, while consumers in the larger cities prefer newer vehicles, he said.

"Pre-owned car sales are much more lucrative," said Guo, who's also a vice-chairman at the China Automobile Dealers Association. "By acquiring more dealers across the country, we would have the network to push forward."

Demand for used vehicles in China is surging as its car market matures. Sales of pre-owned passenger vehicles in the country will climb sixfold to 36 million units by 2023, according to estimates by the dealer association.

Lentuo's American depositary receipts increased by 3.8 per cent to US$3.25 in New York trading. They have risen 18 per cent this year after more than doubling in 2013, though they are still down from their US$8 initial public offering price in December 2010.

Lentuo, which has two outlets that sell pre-owned cars, plans to add two used-car dealers this year, followed by six next year and 12 more in 2016, and sell a total of at least 22,000 of such vehicles a year, said Liang Jiangfeng, head of the company's pre-owned business.