Automaker Dongfeng Motor wants to price its initial public offering (IPO) worth about US$500 million at a competitive price to that of rival Denway Motors (HK: 0203), fund managers said.

The company, which makes cars, buses, trucks, engines and auto parts, began informal marketing of its offering Monday at a 2005 price-to-earnings ratio of 9 to 12 times, compared with 8.5 times for Denway, the fund managers said.

The offering comes as China’s carmaking industry faces challenges ranging from overcapacity to a slowdown in fixed-asset investment and potential increases in automobile sales taxes.

“We have a negative view on China’s auto sector. There are too many uncertainties,” said Teresa Chow, a fund manager at RBC Investment Management.

Shares in Denway, which makes cars under a joint venture with Japan’s Honda Motors Corp., have fallen 12 percent to HK$2.375 (US$0.31) since the Hong Kong bourse approved Dongfeng’s listing last Thursday.

Cars, buses and auto parts accounted for 49 percent, 32 percent and 14 percent of Dongfeng’s revenues, respectively, in the first half of 2005.

Dongfeng had 11.9 percent of the passenger-vehicle market in China for the first half this year, combining the unit sales from its Nissan Motor, Peugeot Citroen and Honda joint ventures, according to China Association of Automobile Manufacturers.

In comparison, Guangzhou Honda, the joint venture between Denway and Honda, had a 7.7 percent market share in the same period.

Dongfeng’s 50-50 engine joint venture with Honda is the sole supplier to all Honda cars made in China, including the Guangzhou Honda-made Accord, Fiat and Odyssey.

The company is the world’s second-largest truck maker in sales volume after the DaimlerChrysler group.

(Shenzhen Daily October 26, 2005)