Dongfeng IPO hopes cut

State-owned Dongfeng Motors, China's fourth-largest automaker, could raise less than half its initial expectation of US$1bn in its first overseas IPO later this year, sources involved in the sale told Bloomberg. The news comes amid a slump in auto sales and a knock-on effect on shares of automakers, which have fallen by as much as 58% since April. At that time Dongfeng, which has ventures with Nissan and PSA Peugeot Citroen, said it was looking to raise up to US$1bn with optimism still high about the world's fastest-growing car market. Since then sales have slumped, and the market has seen a series of price-cutting drives by manufacturers looking to maintain market share. Chinese carmakers have also been hit hard by the increase of more than 33% in prices of sheet-steel in 2004 and intense competition from companies like General Motors and Volkswagen. Analysts also expressed concern that Dongfeng only owns part of its ventures, with the result that it may not have control over how profits and dividends are allocated.