FAW rises on report its sedan may be official car

Bloomberg News (Beijing) - FAW Car Co., the Chinese partner of Mazda Motor Corp., rose for the first time in five trading days after a newspaper reported the company's Red Flag sedans may be named the official car for minister-level officials.

The shares gained as much as 1.9 percent to 9.14 yuan in Shenzhen trading today and traded at 9.02 yuan as of the 11:30 a.m. local-time break. China's benchmark Shanghai Composite Index rose 0.3 percent and the CSI 300 Index added 0.4 percent.

China's efforts to promote the use of domestic-brand cars may include making FAW's Red Flag sedans the official car for minister-level officials, China Business News reported today, without saying where it got the information. This policy may affect Volkswagen AG's Audi brand, which is the most-widely used sedan by government officials, the newspaper reported.

"If the government replaced all its Audi cars with Red Flag cars, the replacement may not affect the absolute quantity of sales, but it would reshape Red Flag's brand," Jenny Gu, an analyst at industry researcher LMC Automotive in Shanghai, said by telephone today.

Martin Kuehl, a Beijing-based spokesman for Audi, said the company doesn't comment on speculation. Calls to the office of FAW board secretary Wang Wenquan seeking comment today went unanswered.

Vehicle sales in China, the world's biggest auto market, slowed last year, increasing 2.5 percent to 18.5 million cars, trucks and buses in 2011, according to the China Association of Automobile Manufacturers. Sales grew 32 percent in 2010.

Passenger Cars

Passenger-car deliveries rose 5.2 percent to 14.5 million, slowing from the 33 percent growth in 2010, according to data from the automakers association. China FAW Group Corp., parent of the Shenzhen-listed carmaker, has production ventures with Volkswagen and Toyota Motor Corp.

In December, China said it will end a seven-year policy of encouraging foreign investment in the nation's automotive manufacturing industry to allow for "healthy development." The announcement came two weeks after the country said it would impose anti-dumping duties on some vehicles imported from the U.S. after failing to block a U.S. tariff on Chinese tires.

Overcapacity in China's auto industry emerged in 2011 and will probably worsen every year through 2015, Mizuho Securities Asia Ltd. said in a Dec. 30 report. Auto-production capacity in the country will probably rise 15 percent in 2012 and 20 percent in 2013, outpacing the estimated 4 percent annual increase in demand, according to the report.