Although FAW Group is expected to complete the A-share listing, the overall listing process may face challenges due to the complex coordination among different stakeholders. The two major centers—Changchun and Tianjin—representing central interests, are more likely to be split, creating internal conflicts.
As one of China’s three largest automotive manufacturers, FAW Group could either go for a full listing or accelerate its listing process. According to sources within the company, the plans for a full A-share listing are now in the final preparation stage and are expected to be disclosed by August. Both SAIC and Dongfeng Group have already completed their full listings, setting a precedent for FAW.
FAW Group is confident in completing the overall A-share listing. While overseas listings can boost brand awareness, they often come with lower valuations. In contrast, the current A-share market has seen a significant valuation increase, which is highly beneficial for FAW’s listing strategy.
The overall listing is considered to be in the best interest of the listed companies. Since the start of the year, FAW Cars (000800), holding 52.96% shares, FAW Xiali (000927), holding 47.73%, and FAW Fourth Ring (600742), holding 20.14%, have gained 133%, 31%, and 131% respectively. FAW Cars produces models like Pentium and Hongqi, while FAW Xiali focuses on economical cars, and FAW Sihuan deals with parts and components. The unlisted assets include joint ventures such as FAW-Volkswagen, FAW-Toyota, and FAW-Liberation.
Due to poor performance from FAW Liberation, profits from FAW-Volkswagen and FAW-Toyota account for half of FAW Group’s earnings. Therefore, "only when FAW-Volkswagen and FAW-Toyota are included will the overall listing hold real significance."
Market attention is focused on the integration of FAW's passenger vehicle resources, especially the equity integration of the two joint ventures. Whether the shareholder status can be successfully converted to include joint venture rights into the listed assets remains uncertain, as the joint venture partners have not given clear support in the past.
Previously, both Dongfeng Motor and Shanghai Automotive opted to consolidate all operations under one listed entity. In March this year, JAC Chairman Zuo Yanan mentioned that the JAC Group is now just a holding company, with its main businesses already covered by JAC and Ankai, making a full listing unnecessary.
Within FAW Group, the key debate is whether to pursue a full listing or a split listing. Some follow the model of Dongfeng and SAIC, consolidating core businesses into one listed company, while others, like JAC, prefer to divide core businesses among multiple listed entities.
Behind these differences lies a power struggle between the "central" and "local" factions. Changchun-based FAW Car has extensive experience in mid- to high-end product development and strong profitability. Although FAW Liberation has lagged, it holds the most accumulated assets and technology. The Changchun faction believes FAW Group should base itself in Changchun and inject FAW-Volkswagen and FAW Toyota assets.
If this approach is adopted, FAW Group, which has a large stake in the group, would become the sole listed platform, gradually injecting passenger car, commercial vehicle, and parts assets. Equity placements in FAW-Volkswagen may begin soon.
Analysts note that the red flag car produced by FAW Car represents the group's own brand. If only one platform is chosen, FAW Car would be the ideal candidate, not only due to its strong historical performance but also because it aligns with FAW Group’s push for independent brand innovation.
However, another faction, including FAW Xiali and FAW Toyota, representing central interests, advocates for two centers: Changchun and Tianjin. This proposal suggests FAW Xiali take over 20% of FAW Toyota’s shares through private placement, placing the two joint ventures under FAW Cars and FAW Xiali respectively, with parts assets injected into FAW Fourth Ring.
It is understood that more developed plans favor splitting core businesses into separate subsidiaries. For FAW, integrating core assets into a single listed company and merging with others for a full listing proves difficult. Coordinating relationships among parties is challenging, and for state-owned assets, the priority is asset securitization rate, not just a full listing.
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