Yulon, ARCB Form Used-Car Sales, Auto-Repair Venture in Beijing

Taipei, Dec. 26, 2005 (CENS)--Taiwan's Yulon Group, the largest automobile-manufacturing conglomerate on the island, recently signed an agreement with Beijing Auto Repair Co. (ARCB) to sell used cars and do auto-body repair in mainland China.

Su Ching-yang, Yulon vice CEO and chairman of Sinjang Corp., Yulon's Taiwan used-car sales arm, said that China's automobile market began booming six to seven years ago. After the Chinese central government adopted a "macro-adjustment" economic policy to cool down economic growth, Su added, the profit margins of new-cars have been declining, causing the market to turn to used-car sales and repairs to generate more income.

Yulon has been actively building a used-car transaction mechanism in Taiwan by cooperating a Japanese partner. The same mechanism will also be employed in mainland China, allowing a platform for used-car transactions on the both sides of the Taiwan Straits.

Yulon is the most active among local automakers in developing business in mainland China. The group began operating in the mainland more than 10 years ago and has set up several auto- and parts- production plants and ventures there.

ARCB is currently the largest new-car dealer in Beijing, selling an average of about 30,000 new passenger cars from 16 different brands per year. The company now runs 29 sales points and 26 repair centers in China, which together generate an annual revenue of about 6 billion renminbi (RMB, or Chinese yuan).

According to Yulon, the 50-50 venture has an initial capitalization of 64 million RMB. Yulon's 50% stake will be held by Sinjang, with 15%; Fortune Motors Co., Ltd., a major Yulon agent, with 25%; and another subsidiary, with 10%. The new venture is constructing an operations center in Beijing and is scheduled to open for business in March 2006.

ARCB chairman Chang Tung will take the helm as chairman of the new venture, while Su will be the vice chairman. The venture's president will be appointed by Fortune Motors, Yulon's major agent in Taiwan.

Industry sources said that in order to prepare for the Olympic Games in 2008, the Chinese central government has ordered that only cars less than three years old would be allowed to drive on roads within the inner area surrounded by the 3rd Ring Road, while only cars less than five years old would be allowed within the 5th Ring Road. The new regulations are expected to necessitate the replacement of more than one million old cars in Beijing and to generate lucrative busienss opportunities for used-car vendors.