广汽集团拟发行股份收购一汽部分合资公司股权并募资，一汽或成第二大股东，港股冲高16%后回落

Shares of Guangzhou Automobile Group (GAC) jumped after announcing plans to integrate resources with FAW Group, following Beijing’s call for consolidation amid weakening domestic demand. GAC planned to acquire part of FAW’s equity in a joint venture vehicle manufacturer through a share issuance and raise supporting funds, the Guangzhou-based carmaker said in an exchange filing on Monday night, after a full-day trading halt. Upon completion, the unlisted FAW would become GAC’s second-largest shareholder with strategic influence, with the controlling owner remaining unchanged, it added. The target asset involved a foreign-listed company, but GAC did not disclose its name or the deal value. GAC is known for joint ventures with Japanese giants Toyota and Honda, while FAW – which is controlled directly by the central government – partners with Volkswagen, Audi and Toyota. The deal is expected to set an important precedent for cross-regional consolidation among central and local carmakers China International Capital Corporation The deal aimed to “promote the optimal integration of industrial resources among local and central state-owned enterprises, and enhance operational efficiency of listed companies,” GAC said in the filing. Investment bank China International Capital Corporation said in a research note on Tuesday that if the restructuring went through, it was “expected to set an important precedent for cross-regional consolidation among central and local carmakers, send a positive signal of ‘anti-involution’, and help improve market sentiment”. Involution, or neijuan, refers to excessive competition, where more resources are invested without increasing returns or reinvestment in research and development. GAC’s Hong Kong-listed shares jumped as much as 16 per cent before trimming gains to 5.5 per cent by the midday break on Tuesday. Trading in its Shanghai shares remained suspended. The announcement followed a pledge by the Ministry of Industry and Information Technology – China’s industrial watchdog – and eight other agencies on Friday to intensify efforts to promote mergers, reorganisations and cross-regional integration among carmakers, while advancing reforms towards group-based management. Despite strong exports, China’s domestic vehicle sales have slowed sharply after years of rapid growth and subsidy withdrawal, squeezing profitability. Retail sales fell 20.8 per cent year on year to 11.7 million units in the first eight months of the year, while profit margins shrank by 1 percentage point to 3.6 per cent in the January-July period, data from the China Passenger Car Association (CPCA) showed. Joint ventures between local and foreign carmakers, which once dominated the mainland market, have struggled amid China’s rapid shift towards electric vehicles (EVs). In August, joint venture retail sales of petrol-powered cars and EVs plunged 35 per cent year on year to some 310,000 units, accounting for just 4.3 per cent of China’s EV market, according to CPCA. Squeezed by domestic EV makers like BYD, GAC’s net loss in the first half of the year widened 76 per cent year on year to 4.5 billion yuan (US$670 million). The deal between GAC and FAW remained in the planning stage, subject to internal approvals and regulatory clearance, GAC said.