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FAW to spend big on R&D

One of China's major carmakers will spend 7.2bn Yuan in 2013, investing heavily in luxury and EV segments.

FAW cars

FAW plans big spend Image: FAW

China FAW Group Corp has announced it will invest 7.2bn Yuan ($1.15bn) in product research and development this year.

Company Chairman Xu Jianyi is hoping the bold spending will enable it to keep pace with both foreign and domestic competitors alike, especially in the luxury and EV segments.

The company will spend around 35.5 billion Yuan ($5.7bn) from 2011 to 2015, of which 10.5bn ($1.7bn) will be invested in its high end Red Flag car series.

The ambitious automaker will also invest 3bn Yuan ($480m) on electric cars and 5.5 billion Yuan ($880m) on passenger car research labs. This level of investment is almost unprecedented in a nation where domestic carmakers, according to a recent report, spend on average just $100m per year on R&D.

It is hard to know whether FAW's spending will pay off. The group saw profitability crash throughout 2011 and 2012 and the state-owned automaker is better known for its trucks than its passenger cars. Heavy spending in the foreign-dominated luxury market and the desperately unpopular EV sector may be a risky strategy.

Tags: automotive industry, China, Corporate News, Forecasts

Published 22nd March, 2013

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