BAIC Motor's IPO is priced for cautious drivers. The Chinese automaker plans to sell shares in Hong Kong at HK$8.90 ($1.15), giving a relatively unracy market capitalization of $8.6 billion.

That reflects worries about the position that BAIC occupies within China's decelerating car market and a healthy degree of reservation over its premium ambitions.

The Beijing-based company has a three-speed business model. Its own-brand low-cost cars are not profitable. Earnings rely on two joint ventures with foreign partners.

A partnership with South Korea's Hyundai Motor producing mass-market cars is the main cash engine, contributing around 5.4 billion yuan ($873 million) to the bottom line in 2013. A joint venture with Germany's Daimler to sell the premium Mercedes-Benz brand contributed less than 800 million yuan.

Mercedes is the focus of the IPO. BAIC Motor plans to use the bulk of the $1.4 proceeds to invest in the luxury car market.

Premium cars sold more than twice as fast as overall passenger vehicles between 2009 and 2013. Still, Beijing Hyundai will continue to account for the lion's share of BAIC profits even under ambitious growth assumptions for the Mercedes business, say analysts at Bernstein.

That explains BAIC's valuation of 7.6 times forecast earnings for 2015, close to those of mass-market carmakers.

Brilliance China Automotive has almost twice the share of the joint venture premium market through its partnership with Germany's BMW. It trades at more than nine times and is forecast to grow its earnings 15 percent between 2014 and 2015, according to Eikon.

BAIC's circuitous structure is also reason for caution. In Chinese auto market, joint ventures with foreign partners dominate, but the question is always who calls the shots.

BAIC owns 51 percent of its alliance with Daimler giving it a majority of the economic exposure and half the board seats. Yet Daimler gets the presidency of the executive management committee. BAIC has potential, but its price reflects the reality of a mass-market firm without control where it counts.

Reuters