Foton plans to put Borgward up for sale

A Borgward BX5 SUV is displayed at an auto event in Haikou, Hainan province.[Provided to China Daily]

Chinese carmaker Foton Motor is planning to sell its Borgward unit, a German brand that is seeking a China revival, and Guangdong province-headquartered conglomerate Baoneng Group is a very likely candidate.

Borgward is aiming for global development, and introducing strategic investors is one of its long-term strategies, the Securities Daily newspaper quoted Foton as saying.

"Many investors, with Baoneng among them, have expressed their cooperation intentions, but we have so far not reached any deal with any of them," Foton said.

Representatives at Borgward did not immediately reply to China Daily's request for a comment on the possible takeover.

Some industry insiders said Foton has overstretched itself financially and is therefore in urgent need of investment to bolster up Borgward's lackluster performance. "Foton is not a sugar daddy itself, but what Borgward requires is too much. So Foton's intention of introducing new investors can be counted as stop-loss," the National Business Daily quoted an anonymous investor as saying on Thursday.

Foton originally launched its business as a manufacturer of commercial cars such as trucks. But it has long held a dream of offering passenger cars, including family sedans and SUVs.

So in 2014, Foton acquired Borgward, which saw its last Isabella coupe roll off the production line in 1961.

Foton spent 5 million euros ($5.82 million) on the deal and soon registered the brand in several countries, including China, the United States and India.

Foton's efforts to revive the brand started much earlier, in 2005. The company has invested more than 10 billion yuan ($1.5 billion) in building facilities and car development, almost equaling all its disclosed profit since it was listed in 1998, according to the National Business Daily.

To make things worse, Borgward did not grow as Foton had expected.

Its first model, the BX7 SUV, hit the market in 2016. For a time its monthly sales hit as many as 5,000 vehicles, but the German label soon lost its appeal.

Borgward launched a smaller SUV, the BX5, earlier this year, but it did not save the day.

Sales of the two models combined stood at 30,000 vehicles in the first nine months, a drop in the ocean of the world's largest car market.

If Borward is to launch more models－two or three a year as it planned to－then it means more investment has to be made, but that seems to be too heavy a burden for Foton.

Foton's financial results show that its net profit in the first three quarters this year was 138 million yuan, a 40 percent fall from the same period last year.

"Baoneng is a very likely investor in Borgward. In fact, it has started due diligence, but it has not decided to make a complete takeover and acquire a stake," people close to Foton told the National Business Daily. Baoneng Group is a property and financial services conglomerate controlled by Chinese billionaire Yao Zhenhua. He became a household name after a failed bid to buy a major stake in China's largest estate developer, Vanke.

Though whether Baoneng will win the bid remains unknown, its interest in the carmaking industry, especially the booming new energy car sector, is obvious.

In late October, the company signed a 14 billion yuan investment agreement with a district government in Hangzhou, Zhejiang province, to launch a new energy vehicle development and production project. Baoneng has already registered an automotive company under its name. Its business includes specializing in the development, manufacturing and sales of engines, chassis, buses, passenger cars and new energy cars, according to the State Administration for Industry & Commerce.

Baoneng has also been rumored to have become a major shareholder of Qoros Auto, a joint venture between Chinese automaker Chery and Kenon Holdings.

Qoros announced in August that it had sold a 51 percent stake to a Chinese company, which is pending regulatory approval. Qoros has not specified the name of the investor but it said that the investment will conclude this year.