FAW Xiali may float share sale

TIANJIN FAW Xiali Automobile Co Ltd is considering additional share sales to fund expanded production and the development of new models following lackluster sales last year.

Shenzhen-listed FAW Xiali, affiliated with China First Automotive Works Group Corp, the nation's second biggest car maker, wants to raise about three billion yuan (US$370 million) by 2010, according to a company source.

"The money will be raised through bank loans, profits as well as bonds or additional share sales," the source said. "We plan to do it when the time is ripe."

The money will be used to build production lines for complete cars and engines. The company plans to double its output capacity to 400,000 units by the end of 2010, including a project that will turn out 100,000 engines.

The car maker also plans to launch two models every year based on an annual investment of 200 million yuan to increase its research and development capabilities.

FAW Xiali was one of China's leading car makers for small-engine sedans, producing the self-branded Xiali and Vela and Vizi introduced from Japan's Toyota Motor Corp.

The company has been seeking to spark sales, after its mainstream Xiali subcompact lost ground last year in intensified competition with overseas giants.

FAW Xiali, China's ninth-biggest car maker, sold 196,817 units last year, a 3.58 percent increase compared with 36.8 percent growth for the auto industry overall.

The company's net profit grew 60 percent to 417 million yuan last year, however, mostly as a result of its 30 percent stake in Tianjin FAW Toyota Motor Co Ltd.

"Xiali is losing competitiveness on its old models as auto buyers in first-tier cities such as Shanghai and Beijing have exhibited higher demand for more mid-class sedans," said Yu Bing, an analyst at Central China Securities Co Ltd.

"It also faces pressure after more and more international giants and domestic auto firms begin to roll out more small cars."

In addition to further exploiting the home market, the company will also tap overseas regions with its price-competitive models.

It aims to export 20,000 units starting next year and raise sales to 50,000 by 2010 in overseas markets.