Chongqing Changan Automobile said in a statement to the Shenzhen Stock Exchange that it plans to raise up to US$585.3 million through issuing new shares, the South China Morning Post reported. The size of the issue will not exceed one fifth of the company’s existing share capital. Chongqing Changan will use the funds to support its investment in economy car production. It will spend over US$590 million on building additional production lines and expanding engine output for economy cars. Passenger car sales in China remain strong thanks to favorable government policies. Rural residents – a natural target market for economy vehicles with engines of 1 liter or less – qualify for a 50% reduction in car sales tax and a 10% subsidy on the purchase price. Chongqing Changan produced 549,000 economy cars last year, which gave it a 27.45% market share in the segment. The new production lines would expand annual capacity by 220,000 units.
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