Changhe: We’re going to stop making cars, we’ll make planes instead

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In news that has rocked the Chinese automotive industry, Changhe Automobile has declared that they will stop producing cars, and will pull out of the Suzuki-Changhe joint venture agreement.

Changhe currently makes the following vehicles for Suzuki: Suzuki Landy, Suzuki Alto, Suzuki WagonR, as well as its own developed vehicles such as the Changhe IDEAL (1 and 2). According to Reuters reports, Changhe are moving into the aerospace business:

SHANGHAI, July 18 (Reuters) – Loss-making automaker Jiangxi Changhe Automobile Co (600372.SS: Quote, Profile, Research), said on Friday it will acquire two aerospace units worth up to 920 million yuan ($134 million) from China Aviation Industry Corp and transform itself into an aerospace company.

Changhe Auto, controlled by AviChina Industry & Technology Co (2357.HK: Quote, Profile, Research), will transfer all of its assets and liabilities and issue up to 90 million new shares to China Aviation in exchange for the two subsidiaries, it said in a statement.

The two subsidiaries’ combined estimated value is 800 million to 920 million yuan, it said.

China Aviation Industry Corp is a state-controlled holding company set up to take control of the country’s two state-run aircraft makers, AVIC I and AVIC II, which officially announced a merger plan last month.

Changhe Auto’s A shares traded in Shanghai jumped by their daily limit of 5 percent to 5.65 yuan in morning trade, outperforming a 0.31 percent rise in the benchmark index .SSEC. The shares had been suspended from trade since June 8. AviChina’s Hong Kong-listed shares fell 1.9 percent to HK$1.55. ($1=6.877 Yuan) (Reporting by Fang Yan; Editing by Edmund Klamann)

It is currently unclear who will take over Changhe’s automobile producing division. Suzuki are reportedly planning to create their own independent sales network to continue selling their products in China, which has been a lossmaker to date.