Bloomberg News

Jianghuai Plans to Double Brazil Sales Amid China Slowdown

October 28, 2011

(Adds stock move in first, fourth paragraphs.)

Oct. 28 (Bloomberg) -- Anhui Jianghuai Automobile Group Co. plans to more than double annual sales in Brazil by 2015 after its publicly traded unit’s shares plunged by almost a third this year amid slowing sales growth in China. The unit’s shares climbed today by the most in two weeks.

Anhui Jianghuai, based in Anhui province’s Hefei city, is forecasting vehicle sales of 100,000 from about 37,000 in 2010, Michael Yang, project director at JAC Motors, a unit of the group, said in an interview in Shanghai yesterday. The Chinese auto company will start building a $600 million factory in Brazil’s Bahia state from next year, he said.

“The factory will help cut production costs of cars sold in Brazil as demand growth is robust in the nation,” Yang said.

Anhui Jianghuai Automobile Co., the listed unit, jumped 3.8 percent to 7.43 yuan in Shanghai today, the biggest gain since Oct. 12. The stock tumbled 30 percent this year amid concern the decelerating Chinese economy will curb demand and smaller companies may face difficulties obtaining loans because of tight monetary policies. China’s gross domestic product grew 9.1 percent in the third quarter, the least in nine quarters.

Chinese auto companies from Chery Automobile Co. to Great Wall Motor Co. and Warren Buffett-backed BYD Co. are seeking to expand in overseas markets or to increase exports as more plants open and domestic sales cool from last year’s 32 percent growth rate. Chinese factories could build 40 million vehicles a year by 2015, outstripping demand of about 27 million, according to the National Development and Reform Commission.

Brazil Growth

The China Association of Automobile Manufacturers cut its forecast for vehicle sales growth to as much as 3 percent this year, from 5 percent, the Economic Observer reported Oct. 19. It was the second time the association cut its estimates, the newspaper said.

As the second-largest emerging market after China and the fifth-biggest car market, Brazil is key for China’s automakers as they start a world expansion. The new Brazilian factory would start production in 2014, Yang said.

Brazil’s Finance Minister Guido Mantega announced last month it was raising the so-called industrial products tax on carmakers. This would boost the cost of imported cars by as much as 28 percent and force foreign automakers to build key components in Brazil, he said.

Brazil, Latin America’s biggest economy, will grow 3.6 percent next year, according to the median forecast in a central bank survey of about 100 economists published last week.

“We have been selling cars at a price similar to the overseas rivals,” Yang said. “That shows the growth potential of the market.”

--Irene Shen. With assistance from Chua Kong Ho in Shanghai. Editors: Allen Wan, Darren Boey

To contact the reporter on this story: Irene Shen in Shanghai at ishen4@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus