Automobile firms may test IPO waters

• Source: China.org.cn
• [10:26 July 30 2009]
• Comments

Surprisingly there is no automaker among the 34 firms already approved to be listed.

"For automobile manufacturers, IPOs are the best route to raise capital due to the low costs involved," said Ouyang Shan, analyst, Orient Securities.

He said that the government push for industry restructuring through a series of merger and acquisitions has forced automobile firms to shore up capital.

"Profitability is the key for a successful IPO. However, due to the economic slowdown, not too many automakers are capable for IPOs."

Ouyang expressed the view that Guangzhou Auto and Chery could be the first firms to test the market waters due to their robust financial capabilities.

China has surpassed the US as the world's biggest vehicle market for six consecutive months this year as the government's stimulus measures have started yielding positive results.

However, domestic automakers reported steep falls in their earnings despite brisk vehicles sales.

According to statistics collected by Shenyin & Wanguo Securities, in the first quarter, net profit of listed automakers in China fell nearly 60.72 percent year-on-year.

Fortunately, the hot sales in the following months helped the firms to recover some lost ground.