Newly listed Guangzhou Automobile Group Co. (2238.HK) is pushing ahead with plans to develop its own car brands to capture mainland China's growing demand for passenger vehicles, Chairman Zhang Fangyou said Tuesday.
The company aims for its home-grown brands to account for up to 20% of total revenue by 2015, he told Dow Jones Newswires in an interview.
Like many of its domestic peers, state-owned Guangzhou Auto produces foreign brands in China through 50-50 joint ventures with overseas carmakers, as it develops its technological know-how with the help of its partners.
The Guangzhou-based company, which has key joint ventures with Japanese auto giants Toyota Motor Corp. (TM) and Honda Motor Co. (HMC), is now pressing ahead with the development of its own vehicles, in line with Beijing's efforts to raise the profile of the nation's proprietary brands to better compete with large international rivals.
Guangzhou Auto is China's second-biggest Hong Kong-listed auto maker by market capitalization after Dongfeng Motor Corp., but it also competes with much larger local car makers such as FAW Group Corp. and SAIC Motor Corp., which aren't listed outside of mainland China.
Zhang said Guangzhou Auto's joint ventures with Toyota and Honda account for around 85% of the company's revenue at present, but it wants to reduce this proportion by developing its own brands. The company also operates auto parts and commercial-vehicle manufacturing businesses.
The company has said it is on track to launch its own brand, the Trumpchi, on the mass domestic market by December, and is targeting annual sales of 300,000 vehicles by 2015.
"The launch of the Trumpchi proves we have the capability to produce a medium and high-end car on our own," Zhang said.
He said the company aims to launch its first hybrid car under the Trumpchi brand by 2012.@@Page@@
Zhang said he is confident the launch of Guangzhou Auto's own models won't have any impact on the company's relationship with its Japanese partners.
"The Chinese market is too big that they can't afford to give up," said Zhang, adding the Honda and Toyota joint-venture companies are also developing their own models for China amid rising competition with local brands. He said he expects Guangzhou Auto's sales to register double-digit growth in coming years.
The company sold 348,667 vehicles in the first half, up 36% from a year earlier and representing 49.8% of its full-year sales target of 720,000 cars.
In August, Guangzhou Auto took 37.9%-owned Denway Motors Ltd. private via a share swap and listed its own shares on the Hong Kong bourse. For the first half, the company's net profit nearly quadrupled from a year earlier, as Beijing's stimulus measures boosted vehicle sales.
Following its listing and the launch of its own brand, Zhang said the company's "next goal is to internationalize itself through M&A, no longer limiting our presence to Guangdong province or even China."
Zhang said the company is open to considering acquisition opportunities to buy technology and brands, but declined to provide a time frame.
Beijing's stimulus measures, designed to encourage auto purchases during the global economic downturn, helped China overtake the U.S. as the world's biggest auto market in 2009. Although auto-sales growth in China remained fast at the start of 2010, the growth has moderated since the second quarter partly because of a reduction in government incentives and high base for comparison a year earlier.
"The exponential growth period in the Chinese auto market due to the stimulus measures is over. But we should be able to maintain double digit growth in coming years because of higher disposable income and increased infrastructure developments," said Zhang.
Zhang said he expects the company's sales in September to record double-digit growth from August, as demand has started to pick up on the back of a traditionally stronger purchasing period for the domestic auto market.
However, he said the growth of China's auto market is slowing down--although it remains at a double digit growth rate--as penetration is still very low.
