Great Wall Auto, the Hong Kong-listed producer of pickups and sport utility vehicles, said Monday that it plans to raise as much as 2.74 billion yuan (US$330.9 million) on the mainland stock market.

The privately-owned vehicle maker, based in North China's Hebei Province, has applied to regulators to issue 300 million A shares on the Shanghai Stock Exchange, it said in a statement.

Great Wall plans to invest some 2.36 billion yuan (US$285 million) of the expected funds in building a 200,000-unit production capacity factory.

The rest will be spent in improving research and development capabilities of its technical center.

If the new share issue is authorized, Great Wall Auto's registered capital will increase to 944.2 million yuan (US$114 million) from 472.1 million yuan (US$57 million).

"It's necessary for Great Wall to turn to the domestic stock market to raise money for its ambitious expansion as it is unlikely to issue new shares in Hong Kong due to its bad performance," said Zhang Xin, an auto analyst with Guotai & Jun'an Securities Co.

"Overseas investors do not think highly of mainland auto stocks in Hong Kong," Zhang said.

Great Wall raised about 1.52 billion Hong Kong dollars (US$194.9 million) by issuing 114 million shares on the Hong Kong Stock Exchange at the end of last year.

But its price per share has tumbled by nearly 50 percent since then because of investors' concerns about overcapacity in the domestic auto market.

Great Wall, the 11th biggest vehicle producer on the Chinese mainland, has announced that it plans to invest 10 billion yuan (US$1.2 billion) to lift its annual production capacity to 600,000 vehicles within the next four years from 70,000 units at present.

It will spend 2.2 billion yuan (US$265.7 million) to increase production capacity to 350,000 vehicles in 2006.

Its product line will extend to passenger cars and multi-purpose vehicles.

Overcapacity concerns are growing as almost all foreign and domestic automakers are building new plants while growth of new vehicle sales in China is slowing down.

Nearly 30 domestic auto stocks had mixed performances during the first half of this year as a result of the decelerating sales growth and mounting competition.

Profits for Shanghai Automotive Co, FAW (First Automotive Works) Car Co and Chang'an Automobile Co grew rapidly during the period, helped by strong sales.

Meanwhile, Shenyang Jinbei Automobile Co and Tianjin FAW Xiali Co made losses and reported a profit plunge due to sluggish sales and cost increases.

Official statistics showed that sales of China-made vehicles rose by 20.57 percent year-on-year to 2.9 million units in the first seven months of this year mainly due to China's macro economic controls. The growth rate was down from 34 percent last year.

Growth of passenger car sales dropped to 27.09 percent during the period from 75 percent last year.

Great Wall closed at 7.25 Hong Kong dollars (US$0.93) per share yesterday, up 2.11 percent.

(China Daily August 31, 2004)