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Manufacturers, Exporters, Wholesalers - Global trade starts here.
Dongfeng Plans to Boost Outputs to Maintain Position

Dongfeng Motors, China's third-largest car maker, said it will boost its output "significantly" in the future to maintain its strong position in the market.


The auto maker, which has raised HK$3.97 billion (US$512 million) after it priced its Hong Kong initial public offering (IPO) this month, also said it has no plan to form new joint ventures with overseas players for the time being.


"We will have to boost our capacity in the coming years," Executive Director Zhou Wenjie told reporters in Hong Kong yesterday, without specifying the goal or giving a timeframe.


However, reports have said there are plans to invest US$3.1 billion to increase output by 65 percent to 1.2 million vehicles by 2008.


Dongfeng, whose shares begin trading in Hong Kong today, is the third-largest car maker on the mainland, following First Automobile Group Company and Shanghai Automotive Industry Corp. It had a 12 percent market share of the passenger-vehicle market on the mainland in the first half of the year, according to the China Association of Automobile Manufacturers.


In the first eight months of this year, the company produced 329,000 vehicles, up 17 percent from a year earlier, and sold 321,000 units, up 19 percent from the same period.


The Wuhan-based company, which makes cars under 50-50 joint ventures with Nissan, Honda and Citroen, said it currently has no plan to cooperate with new overseas players, but "in the case of good opportunities in the future, we would consider establishing new ventures," according to chairman Xu Ping.


Commenting on the mainland's current auto market, which has been witnessing price cuts and a sales slowdown due to overcapacity, Zhang said he still remained optimistic about the long-term development.


"Given the current rapid economic growth and increasing personal income, the market potential remains huge," he said.


Chinese car makers face fierce competition in the world's third largest vehicle market, with shrinking profit margins for most car markets this year.


According to official estimates, sales of passenger cars may grow by about 10 percent in 2006, a massive fall from the 76 percent surge in 2003 and the 50 percent increase in 2002.


As for its IPO and the upcoming trading debut, Zhang said Dongfeng is satisfied with the subscription results and believes the shares will trade well.


Dongfeng priced its 2.438 billion shares at HK$1.6 (20.5 US cents) a piece on December 1, after its retail portion or 10 percent of the shares were oversubscribed by 100 percent, while the rest, for institutional investors, were 6 times oversubscribed.


It was the second listing attempt by the company, which delayed a listing last year. The current IPO is half of the previous listing attempt.


(China Daily December 7, 2005)


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