China's Beijing Auto buys smaller rival to boost production

SHANGHAI Wed Aug 7, 2013 5:14am EDT

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SHANGHAI Aug 7 (Reuters) - China's state-owned vehicle manufacturer Beijing Automotive Group Co Ltd said on Wednesday it had agreed to buy smaller domestic firm Zhenjiang Automobile to help it meet its target to double production by end-2015.

Beijing Auto did not disclose the value of the deal but said in a statement it would invest 15 billion yuan ($2.45 billion) in Zhenjiang Automobile to expand vehicle production.

Beijing Auto aims to produce 3.5 million vehicles by the end of 2015, compared with 1.7 million units last year.

Beijing Auto produces vehicles on its own and in joint ventures with global automakers, including Daimler AG , the owner of the Mercedes-Benz brand, and Hyundai Motor Co. Most of its cars are sold within China.

The purchase of Zhenjiang Automobiles fits in with Beijing Auto's strategy to grow through domestic and foreign acquisitions.

The company is also seeking to boost sales and revenues to better compete with bigger domestic rivals such as FAW Group and SAIC Motor Corp Ltd which make cars with partners including General Motors Co and Volkswagen.

Dong Haiyang, the president of Beijing Auto's international unit, said in a recent interview that the company is seeking to buy "a mid-to-high-end European auto brand" and had identified two potential targets. He gave no further details.

The company has also established an international unit in June, and is setting up a financing vehicle in Hong Kong to fund expansion abroad.

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