FAW Car Co Ltd said it plans to invest 2.36 billion yuan (US$344 million) to fund home-developed vehicles despite the current troubles in the automotive industry.
The listed affiliate to the nation's second biggest auto maker, FAW Group, said the investment would enable it to have an additional 200,000 vehicles carrying its brand every year by 2012, according to a statement filed to the Shenzhen Stock Exchange yesterday. Its current capacity totals 120,000 units.
Threats of another round of price hikes on raw materials and an oversupply of vehicles in China amid weaker market demand have clouded the earnings outlook for the car maker, which rolls out models under its Besturn and Red Flag brands.
Demand for Chinese-brand vehicles was affected when overseas car makers introduced price competitive models to bolster sales in the world's second largest auto market.
"There might be risks because of changes in the macroeconomy environment," FAW said in the statement.
"But the move serves our target of adjusting the industrial structure, broadening the product mix and enhancing engineering capability in the long term," it added.
A separate report showed FAW Car's net profit fell 4 percent in the third quarter ending in September, the fall blamed on slow market demand.
China's mainland passenger car sales in September posted a year-on-year drop of 1.4 percent as flagging stock market and weak economic outlook dented purchases.
The company's shares dived 8.68 percent to 5.05 yuan yesterday, while the Shenzhen Composite Index fell 6.49 percent.
FAW Group is also the Chinese partner of Volkswagen and Toyota Motor Corp in China, assembling VW's Bora and Sagitar sedans.