Fulton Mak
Monday, November 06, 2006
Dongfeng Motor Group (0489), one of the mainland's largest automakers, said its parent company plans to launch its own original brand of commercial vehicles in 2008 and the business may be injected into the Hong Kong-listed subsidiary when it becomes mature.
Executive director and president Liu Zhangmin said the Wuhan-based parent, Dongfeng Motor Corp, intends to enter the original brand and manufacture market by making its own brand of trucks. Currently, the group mainly manufactures and sells passenger and commercial vehicles through joint ventures with Nissan Motor, PSA Peugeot Citroen, and Honda Motor.
"We will let our parent company develop Dongfeng's own branded vehicle. Then we will buy the business from our parent when the profit margin of the business is comparable to the existing business," Liu told The Standard.
He estimates the group sold 62,468 vehicles in October, up 32 percent year on year, but down 12.27 percent from a month earlier.
For the first 10 months this year, the company sold 594,932 units - already surpassing the total of 594,801 units in all of 2005.
Passenger cars accounted for 64.7 percent of this year's sales, while commercial vehicles accounted for the remaining 35.3 percent.
The carmaker earlier set its 2006 sales target at 760,000 vehicles, or about 63,333 per month. After 10 months, it is about 38,401 units behind schedule. Liu said there is pressure to cut prices, but the company will not do so to boost sales to meet the full-year target.
"It's not necessary to achieve the 760,000-unit sales target, and I don't suggest pursuing the goal by cutting prices if it will hurt the gross profit margin," Liu said.
He declined to predict if the target was still achievable.
Nevertheless, the company expects its annual sales to increase by more than 15 percent, well ahead of the average market growth of 10 to 15 percent.
Citigroup said carmakers should be less concerned about cutting selling prices if volume regains momentum in the fourth quarter.
It said falling oil and raw material prices, depleting inventory and rising export revenues should further improve the sector's profitability.
Last Friday, sources said a Dongfeng institutional investor was seeking to sell 95 million H shares at a range of between HK$3.69 and HK$3.74 each to cash in up to HK$355.3 million.
The stock closed that day at HK$3.84, up 14 HK cents.
Monday, November 06, 2006

Executive director and president Liu Zhangmin said the Wuhan-based parent, Dongfeng Motor Corp, intends to enter the original brand and manufacture market by making its own brand of trucks. Currently, the group mainly manufactures and sells passenger and commercial vehicles through joint ventures with Nissan Motor, PSA Peugeot Citroen, and Honda Motor.
"We will let our parent company develop Dongfeng's own branded vehicle. Then we will buy the business from our parent when the profit margin of the business is comparable to the existing business," Liu told The Standard.
He estimates the group sold 62,468 vehicles in October, up 32 percent year on year, but down 12.27 percent from a month earlier.
For the first 10 months this year, the company sold 594,932 units - already surpassing the total of 594,801 units in all of 2005.
Passenger cars accounted for 64.7 percent of this year's sales, while commercial vehicles accounted for the remaining 35.3 percent.
The carmaker earlier set its 2006 sales target at 760,000 vehicles, or about 63,333 per month. After 10 months, it is about 38,401 units behind schedule. Liu said there is pressure to cut prices, but the company will not do so to boost sales to meet the full-year target.
"It's not necessary to achieve the 760,000-unit sales target, and I don't suggest pursuing the goal by cutting prices if it will hurt the gross profit margin," Liu said.
He declined to predict if the target was still achievable.
Nevertheless, the company expects its annual sales to increase by more than 15 percent, well ahead of the average market growth of 10 to 15 percent.
Citigroup said carmakers should be less concerned about cutting selling prices if volume regains momentum in the fourth quarter.
It said falling oil and raw material prices, depleting inventory and rising export revenues should further improve the sector's profitability.
Last Friday, sources said a Dongfeng institutional investor was seeking to sell 95 million H shares at a range of between HK$3.69 and HK$3.74 each to cash in up to HK$355.3 million.
The stock closed that day at HK$3.84, up 14 HK cents.