Shanghai Auto purchases one percent stake in GM

China's Shanghai Automotive Industry Corp(SAIC) confirmed that the company has bought 1 percent stake in General Motors for $ 500 million. The state controlled SAIC stated that this investment was made on the basis of good, strategic parties between the two auto majors and their confidence for the growth of General Motors.

Cheif Financial Officer, Christopher Liddell said that the foriegn based investors expressed their strong interest in General Motor's public offering and finally ended up with 10% stock of GM sold in the IPO. He conveyed that 90% of the shares were allocted domestically. He added that some sovereign wealth funds also took some shares but in the end, the figures were modest. These sovereign funds are state owned investment funds. Shanghai Auto said that the company was open to buy the shares of GM since 1997. The two auto companies collaborated in China. In China the foreign companies are allowed to produce cars only in collaboration with the domestic automotive companies.

China is considered to the most aggressive automotive market, here GM has been successful in selling more that 2 million vehicles and now the foriegn automajors are targeting the Indian auto industry where they foresee vast growth. SAIC said that General Motors is an important strategic partner for them and added that the healthy relations between the two sides for mutual benefit and mutual trust exists for more than a decade.

At present, Shanghai Automotive Industry Corporation is the controlling shareholder of Shangai Motor Corp., which presently is acquiring 15.15 million General Motors share at the cost price of $ 33 per share that is set to garner at least 20.1 billion dollars through its SAIC Hongkong Investment Ltd. Unit.

In last one decade vehicle consumption in China has increased rapidly which has set up perfect market conditions in China and it has thus become one of the major auto hub for the automaker. In the first half of 2010, automobile sales in China mounted up by 30.45 per cent yoy to 7.18 million units with the passenger vehicle sales being 5.42 million units showing a raise of 25.58 per cent yoy.

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