FAW to invest 1b yuan to develop MPV model

FAW Group Corp said it will invest 1.03 billion yuan ($163.68 million) to develop a high-end multi-purpose vehicle, or MPV, in a bid to catch up with competitors in that market, the National Business Daily reported on Thursday.

Zhang Peijie, general manager of FAW Car Co Ltd, said at the 2011 Shanghai International Auto Exhibition that the company planned to push forward a MPV model in 2014 to meet customers' demand.

FAW has already invested 5.2 billion yuan in the revival of its brand Redflag this year, and has said it plans to invest 4.35 billion yuan in new-energy technology projects.

Industry insiders said that, along with the slowdown of its profits, the large investments are likely to bring financial pressure in the next few years. They added that the company's sluggish performance will also affect its plans to go public.

FAW said on Oct 30 that its income slid 29.54 percent year-on-year to 18.13 billion yuan in the first three quarters, and that it registered a 311 million yuan net loss for the same period.

Domestic brands are facing greater challenges in the increasingly competitive Chinese auto market due to the economic slowdown and weak demand, the company said at the time.

Sales for some of the company's brands declined steadily from the beginning of the year. One of its main models, the Pentium B50, sold 37,600 units, down 44 percent year-on-year in the first three quarters, while sales for the Pentium B70 were only 11,600 units, down 47.8 percent.

Analysts said that the main reasons behind the sales slump are the fact that FAW has not rolled out new models continuously, and that it lacks technological innovations.

In addition, its newly launched brand Oley has not brought a pickup in sales.