FAW May Relocate Head Office to Beijing

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Last updated at: (Beijing Time) Tuesday, October 22, 2002

FAW May Relocate Head Office to Beijing

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China's largest automaker, the FAW Group, is planing to relocate its headquarters from Changchun in Northeast China's Jilin Province to Beijing as part of its campaign to cement its leading position and better tailor its strategic goals for China's flourishing auto market in the coming years.

The move marks its latest strategic reshuffle following its merger in June with another giant auto manufacturer -- the Tianjin Automobile Industry Corp -- and its strategic tie-up with the Japanese auto giant Toyota in late August.

The company is anticipating benefitting from preferential tax policies, closer ties with top decision-making bodies and better and easier links with business partners.

The company has already purchased an office building in the east of downtown Beijing at a cost of several hundreds of millions of yuan (several tens of millions of US dollars), according to a senior company official.

Between around 100 and 300 of the 700 senior officials working in its Changchun headquarters will move to Beijing next year.

However, its major manufacturing facilities will stay in Changchun.

Tianjin Automobile will also establish a large representative office in Beijing.

A senior FAW Group official surnamed Lu told Business Weekly last week: "The new location can enable us to better oversee the market and it will be a much better base for communicating with our partners, including government departments, the academic sector and foreign partners."

But the company's public-relations department did not confirm the relocation and the China Association of Automobile Manufactures, the advisory and consulting body of China's auto industry, also had no comment.Many experts believe that a stronger reason behind the abandonment of the Changchun base is the firm's desire to find a better environment to facilitate the FAW Group's growth in the light of China's World Trade Organization membership, which has brought stiffer competition to the auto sector.

Compared with the giant Shanghai Automobile Industry Corp, which is based in the East China financial hub, the FAW Group has found it much more difficult to react efficiently to the market. The same problem has affected Dongfeng Auto, another of the country's three major automakers and based in Wuhan in Central China's Hubei Province.

Earlier media reports speculated that Dongfeng also plans to relocate its headquarter to Guangzhou, the capital and business hub of South China's Guangdong Province.

Experts believe a major reason for the rumoured withdrawal is disappointment in the measures taken by the current Wuhan local government to stimulate growth.

The FAW Group is one of the country's largest State-owned companies, 53 per cent of Changchun's tax income comes from FAW, making it one of the most important companies in the city.

Negotiations with the local government could play one of the most vital roles in the planned relocation being called off. "But at least we can set up a super-large representative office in Beijing if no deal is reached in the end," said Lu.

He told Business Weekly that the company has already talked with a number of partners, including Beijing Auto and a Qingdao-based automaker, about those companies moving their headquarters to Changchun but these efforts all failed.

Founded in 1953, FAW has become of the country's backbone automakers. It produced China's first auto product -- the Jiefang truck -- in 1956 and developed the first Hongqi car in 1958.

In line with the country's opening-up, the vehicle models were modified and the plant was renovated in 1981 and new Jiefang trucks were manufactured in 1986.

FAW has made light vehicles and passenger cars since 1987. It established two bases for the annual production of 60,000 light vehicles and 30,000 Hongqi cars, and a base for 150,000 Jetta cars with Germany's Volkswagen.

At present, FAW has 35 wholly owned plants, 11 subsidiaries and 12 holding companies. It has a stake in a further 14 companies.

According to its website, the target of FAW in the 21st century is to become an auto-industry group with an annual production capacity of 1 million vehicles. In the first nine months of this year, the company sold a record 432,585 units, and it expects to sell 500,000 units this year as a whole.

China's auto market has witnessed explosive and sustainable growth in recent years. Sales of passenger cars and commercial vehicles are expected to grow to 3.4 million units this year. About 1.2 million to 1.3 million of those vehicles are expected to be passenger cars.

And China is expected to become the world's second-largest vehicle market, surpassing Japan, by 2010. By 2025, it could even pass the United States, where vehicle sales are expected to top 17 million this year.

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