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Guangzhou Auto's decision to buy 29 percent stake in Hunan Changfeng Motor for around 1.05 billion yuan on Thursday afternoon brightened a gray day for many news reporters and industry analysts, who have been keeping close eyes on the deal.
For it is believed to be a win-win deal for both of the two companies.
Changfeng, which supplies its Leopard SUVs to China's military, would fill a gap for Guangzhou Auto in SUVs, which are popular among young consumers in big cities, industry analysts told Reuters.
It also would give Guangzhou Auto a production base in inland provinces where automobile demand has started to pick up as a result of government's support for consolidation between automakers in the country.
In turn Changfeng will get successive investment of 10 billion yuan from Guangzhou Auto over the next five years to fund further growth. Changfeng's remaining stakes in the new company will enable its long-term benefit from the tie-up.
Gasgoo: auto parts source
