Reuters (Beijing) - Shares of Pangda Automobile Trade Co Ltd , China's largest listed car distributor, rose by as much as 5 percent on Tuesday, a day after it entered a 110-million-euro initial deal to rescue Saab, one of Sweden's best-known auto brands.
Pangda's yuan-denominated A shares traded in Shanghai ended the day up 3.4 percent, trimming earlier gains but still outperforming the flat benchmark index .
"The Saab deal throws a lifeline to the Swedish brand, which could be out of business in a matter of weeks otherwise," said Cao He, an analyst with Minzhu Securities.
"But it's beneficial for Pangda as well as it not only gives it the exclusive rights to sell Saab in China, but also an opportunity to get into the manufacturing business."
Based in the northern province of Hebei, near Beijing, Pangda, which has been handling Toyota Motor , Volkswagen , Honda Motor and Subaru models, had shown interest in making cars itself.
It had explored making Subarus in China with Fuji Heavy Industries , but Japan's smallest car maker seems to be more interested in teaming up with a manufacturer, such as Chery Automobile or Great Wall Motor.
A Spyker tie-up, which still requires regulatory approval, would give Pangda a foothold in the upstream side of the value chain in the world's largest auto market, analysts say.
"Whether the Spyker deal will be approved by the Chinese government is anyone's guess. But exclusive rights to sell Saab in China where premium brands remain in hot demand despite a market cool-down is a good enough deal already," Cao added.
Car sales growth in China slowed to the single-digits for the third consecutive month in April after Beijing stripped away most of its auto policy incentives at the beginning of this year.
But the premier segment was hardly affected due to China's increasingly large moneyed class. Sales of Mercedes-Benz jumped 56 percent in April and were up 77 percent year to date.
Pangda's dealers were also positive on the Saab deal.
"Saab has hardly been available anywhere in China after General Motors sold it. It's good that it will be back in showrooms here again," Sun Shufeng, a 28-year old sales manager at a Pangda dealership in Beijing, told Reuters.
"Saab is a niche player and the volume won't be as big as mass market brands, but there are people out there that like Saab in China."
On Monday, Spyker Cars NV , Dutch owner of Saab, announced a deal with Pangda that it said would secure Saab's medium-term funding needs and allow production to resume within days.
The agreement comes after a deal with another Chinese rescuer, Hawtai Motor Group, fell through last week. [ID:nL3E7GD1SA].
Some industry observers noted that the latest deal could face some of the same hurdles as overseas investment by a Chinese company needs government endorsement.
"I am not sure how the Pangda-Saab deal will play out in the end. Pangda's shares haven't been doing well since its IPO in April and it needs something to push them up. The Saab deal would serve that purpose at least for now," said Guotai Junan Securities analyst Zhang Xin.
"But how sustainable the uptrend will be remains a big question."
