Dongfeng Motor Targets 15% Increase In 2012 Vehicle Sales

Dongfeng Motor Group Co. (0489.HK) said Wednesday it expects to outpace growth in China's auto market this year, with the launch of nine new models boosting its vehicle sales by 15%.

The Hong Kong-listed car maker is targeting sales of 2.45 million to 2.5 million cars in 2012, up from the 2.17 million it sold last year, Chairman Xu Ping told a news conference. China's automobile sales are estimated to rise 8%-10% this year, he said. Dongfeng Motor, which had a share of around 12% of China's automobile market last year, posted sales growth of 11.7% for the 12 months ended Dec. 31.

The company said Tuesday it plans to spend CNY41.6 billion to boost its production capacity in 2012 and 2013.

The upbeat growth forecasts sent Dongfeng Motor's shares in Hong Kong up 4.8% at HK$13.88 Wednesday. The benchmark Hang Seng Index ended down 0.8%.

Despite the sales growth last year, the firm on Tuesday posted a 4.6% fall in its 2011 net profit as intensifying competition in China's auto market weighed on product prices. Disruption caused by the Japanese earthquake in March also hit car sales at its joint venture with Honda Motor Co., Xu said.

After a record year of car sales in 2009 when China overtook the U.S. to become the world's biggest auto maker, the nation's auto-sales growth started to weaken from the second half of 2010 because of a cut in the stimulus measures that had supported car purchases. The absence of stimulus measure as well as rising competition from domestic rivals and Sino-foreign joint ventures has been hitting the industry's profitability.

But Xu said Tuesday the company expects its sales growth to continue to outpace that of the industry in the next few years.

Meanwhile, Xu said Wednesday the company is in talks with Swedish truck maker Volvo on potential cooperation, though he didn't give details or a time frame.

"We're still in discussions with Volvo on the possible synergy we could have," Xu said.

The Economic Observer newspaper reported in December the Swedish truck maker, which makes heavy-duty trucks under the Renault, Mark, UD trucks and Eicher brands, agreed to set up a commercial vehicle joint venture with Dongfeng Motor. Dongfeng will hold 55% of the joint venture, with Volvo holding the remaining 45%, according to the report, which cited sources familiar with the situation.

The truck business, owned by AB Volvo, operates separately from Volvo Cars, which is owned by Zhejiang Geely Holding Group.

-By Joanne Chiu, Dow Jones Newswires; 852-2802-7002; joanne.chiu@dowjones.com

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