January 22, 2009 / 11:31 AM / 9 years ago

UPDATE 1-Brilliance Auto investing $439 mln in China plant

(Adds details, background)

Fang Yan

SHANGHAI, Jan 22 (Reuters) - Brilliance Auto, parent of Brilliance China Automotive Holdings (1114.HK), is investing 3 billion yuan ($439 million) in a new plant in northeast China, banking on policy support to boost sales of small cars.

The manufacturing plant, with designed annual capacity of 150,000 cars with engine sizes of 1.6 litres or smaller, is expected to start operation in June 2010, it said on Thursday.

Brilliance’s car venture with BMW (BMWG.DE) is also expanding its workshop floor at a plant, also located in the city of Shenyang, in preparation for the production of new models in the future, a spokesman with the venture told Reuters.

He had no specific information on the scale of the expansion project or the new car models to be made at the plant, which currently produces up to 41,000 BMW 3 series and 5 series sedans annually.

Car sales growth in China, the world’s second-largest auto market, slowed to a single-digit rate in 2008 for the first time in at least 10 years as consumption waned with a slowing economy.

As a result, General Motors (GM.N) and many other automakers have braked aggressive expansions this year after reporting much slower China car sales in 2008.

In the next couple of years, the U.S. automaker will not add new vehicle manufacturing facilities in the country, where its total capacity is at about 1 million units, its Asia president Nick Reilly told Reuters in December.

To help lure buyers back into showrooms, Beijing recently unveiled a raft of policies, including halving the auto purchase tax for cars with engine sizes below 1.6 litres.

POLICY SUPPORT

Brilliance Auto has laid out an ambitious target to more than triple its vehicle sales to 1 million by 2012, up from 300,000 in 2007, its chairman Qi Yumin told Reuters in April 2008.

The new car project will help the automaker realise its mid-term target of selling 500,000 vehicles in 2010, Qi said in a statement.

    Other potential beneficiaries of Beijing’s stimulus policy package, which also includes generous subsidies to owners who trade their high-emission farm vehicles for more fuel-efficient and clean ones, are also bullish on market prospects for 2009.

    Pick-up truck and sport utility vehicle maker Great Wall Motor Co (2333.HK) aims for a nearly 70 percent jump in vehicle sales this year, a company executive told Reuters on Wednesday.

    Geely Automobile Holdings Ltd (0175.HK), which makes mostly compact cars, said earlier this month it aimed for a 25 percent rise in car sales this year.

    Brilliance, which is selling in more than 60 countries, mostly in emerging markets, is among a very small club of Chinese automakers that have started tapping mature markets in Europe.

    The firm made headlines in Europe in 2007 when it received a rating of just one star out of five in a crash test for its BS6 sedan by Germany’s ADAC auto club.

    A subsequent crash test showed results that would correspond to three stars under the official test after it improved the car’s safety standards.

    Brilliance’s self-developed BS6 and BS4 sedans are now available in Germany through HSA Motors Europe, the firm’s importer for Europe, a Brilliance spokeswoman told Reuters. (Reporting by Fang Yan, Editing by Jacqueline Wong)

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