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Daihatsu eyes JV with FAW in 2009

JILIN, Jilin ¨C Daihatsu Motor Co., Ltd. will consider launching the second car model with FAW Jilin Automobile Co., Ltd. (FAW Jilin Auto) in China on condition that the sales of Xenia exceed 15,000 units in 2008.


According to a previous contract signed by FAW Group Corp. (parent company of FAW Jilin Auto) and Daihatsu Motor, the Japanese partner will not think of setting up a joint venture with FAW Jilin Auto until the rollout of at least two or three models in China.


Daihatsu Motor, a subsidiary of Japanese auto giant Toyota Motor Corp., is mainly engaged in the manufacturing and marketing of compact cars. In 2006, it signed a contract with FAW Group Corp. on technology introduction. From then on, it has been in talks with the Chinese automaker to set up a JV engaged in both production and marketing in China. However, the plan seems to have been deterred by the low sales of Xenia in the world¡¯s second largest auto market.


Xenia, with a price tag between ¥69,800 and ¥98,800, is a low-displacement recreational vehicle. Launched in China in June last year, it has only achieved an average sales of about 500 units per month since its debut in the domestic market. Currently, about 75 percent of the auto parts of Xenia are locally made. However, its major parts like engine and gearbox are still imported, which greatly lifted the cost.


Currently, the Xenia is distributed through the sales network of FAW Jiabao, a low-end light bus model produced by FAW Jilin Auto. As it¡¯s believed that Jiabao¡¯s low-end image has been dragging down Xenia, Daihatsu Motor is now considering setting an independent sales network. Daihatsu Motor had selected a total of 87 dealers for Xenia by December 4, 2007 and expects to lift the figure to 100 by the end of January 2008 and about 160 at the end of 2008. The Xenia will be available in an independent network soon.


According to rules and regulations in China, the investment of a new automobile project in China should be no less than ¥2 billion. ¡°It is a must for Daihatsu to think about how much it could obtain from the investment in the future joint venture¡±, said a senior Daihatsu Motor executive. Yet Daihatsu is still quite optimistic about China¡¯s booming car market and believes that compact cars will hold a bigger market share in the future.

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