Chery revives IPO plans for expansion, perception boost - August... http://www.chinaeconomicreview.com/today-in-china/2009_08_0...
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Chery revives IPO plans for expansion, perception boost
August 2nd, 2009
In mid-July, Anhui-based Chery Automobile announced it would resume plans for a domestic stock listing it had
shelved in March 2008. The company didn't give a timeline for the listing or say how much it expects to raise,
but analysts said it's not surprising Chery is talking listing now. Markets are rallying – contributing to Beijing’s
decision to lift the freeze on initial public offerings in late June – and Chery would be wise to seize the moment.
“It needs to raise capital if it is going to expand both domestically and internationally,” said Bill Russo,
president of Synergistics Limited, a Beijing-based business consultancy with a focus on the auto industry.
Russo said Chery's plans for expansion are ambitious and include entering into mature markets such as North
The magazine America, Europe and Australia. The company has also expanded from one to four brands – Chery, Karry, Riich,
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GET NEWSLETTERS Chery currently has the capacity it needs to fulfill domestic demand. An IPO, however, would give the company
MOBILE VERSION the funding it needs to finance its brand roll-out and build up technical and production capacity. More funding
would also help Chery build up dealer networks internationally to compete against established international
CER events players in their home markets.
UPCOMING EVENTS:
But an IPO would be about more than just additional capital. It would also help Chery to change from a locally
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government-owned company into a publicly listed company, said John Zeng, senior market analyst for Asia
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automotive research with IHS Global Insight .
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“Their financial information will be more transparent and their corporate governance structure will be more
Companies in 2009
visible. Government officials won’t be able to put as much influence on the company,” Zeng said.
CER store He cautions, however, that the degree of change depends on what percentage of Chery is publicly tradable.
NEW RELEASES: Synergistics’ Russo said he expected about 20% of the company to be listed, noting that while Chery would
China Business Guide 2009 remain a state-owned firm, a listing would help with public perception.
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Other Publications “A Chinese company that doesn’t list has a perception of lack of transparency as to its true financial status,”
said Russo. “So the process of listing will go a long way in alleviating those fears.”
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While having little effect on the company’s operations, analysts say a listing would be more than cosmetic.
While Chery is not the first Chinese automaker to pursue a listing, the company’s size and high profile mean
that it could nonetheless send a strong signal to the international community.
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ONLINE DIRECTORIES “It’s another sign that the Chinese car manufacturers are taking steps to become global players, and a warning
TRAVEL & TOURISM CENTER for the international players that the Chinese are there and wanting to get into the international market also,”
CHINA TRADE SHOWS said Klaus Paur, director of automotive research for North Asia, Greater China and Korea at TNS.
Perceptions are worth little without the products to back them up. Paur says Chery does not have the
high-quality products needed to compete against international brands selling in China. That could cause
problems for the development of the company’s luxury and business brands.
“If you’re not able to deliver the products that go along with your brand ambition then you destroy your brand
image,” Paur said. Confidence from the market and financial community of Chery’s ability to deliver on its
brand promises would determine its success or failure on the financial markets, he said.
The risks are unlikely to deter the company from pursuing its IPO, however.
“[Chery] had wanted to do this for quite some time, but with the meltdown last year they didn’t press the
button,” said Synergistics’ Russo. “Now seems like an opportune time with the markets starting to rebound.”
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China's migrant workers are back at work (August 5th, 2009)
CBRC considers slowing loans (August 4th, 2009)
How's Business? - Continental Airlines (August 4th, 2009)
China's manufacturing expands for fifth straight month (August 3rd, 2009)
The Numbers: Military veterans' benefits, rain, mudslides, and Geely's bid for Volvo (August 3rd, 2009)
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PBoC comments alleviate market fears (July 31st, 2009)
China markets fall despite strong IPOs (July 30th, 2009)
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Chery revives IPO plans for expansion, perception boost - August... http://www.chinaeconomicreview.com/today-in-china/2009_08_0...
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