BAIC shows SUV concept cars at the Beijing auto show. European Pressphoto Agency

HONG KONG—Chinese state-backed BAIC Motor Corp., which is partly owned by German automotive group Daimler AG , is gearing up to raise about US$2 billion in a Hong Kong initial public offering before the end of the year, paving the way for what could be the largest listing by a Chinese car maker.

The Chinese auto maker submitted a draft listing prospectus to the Hong Kong Stock Exchange Wednesday, in the first step to getting listing approval from the exchange. The company will be listing in the city as early as the third quarter if it gets approval, a person has direct knowledge of the deal said Thursday. Funds raised from the IPO will go toward part of its US$5.4 billion expansion plan, announced late last year, and comes as China's rising demand for luxury cars lifts BAIC Motor's sales.

If BAIC Motor's listing plan is approved, its IPO will be Hong Kong's biggest this year since tycoon Li Ka-shing's Power Assets Holdings Ltd. raised US$3.11 billion in an IPO in January. BAIC is controlled by the Beijing municipal government.

It will also be the largest car maker to go public in the city since truck maker Sinotruk (Hong Kong) Ltd. raised US$1.3 billion in Nov. 2007, according to data provider Dealogic.

An IPO could bolster BAIC Motor's war chest, allowing it to increase its market share in China's automobile market through acquisitions and production expansion. Daimler in November bought a 12% stake in BAIC Motor for €625 million (US$853.7 million) in an effort to tap the nation's fast-growing luxury-car market with its Mercedes-Benz brand and compete with foreign rivals such as Audi AG and BMW AG .

The company said in its preliminary listing prospectus that it is seeking to raise funds through an IPO to finance a 33.16 billion yuan (US$5.39 billion) expansion plan. More than two-thirds of the funds will be used for car production at a joint venture BAIC has with Daimler called Beijing Benz Automotive Co., which produces passenger cars under the Mercedes-Benz brand in China.

BAIC Motor, which also has a 50-50 joint venture with South Korea's Hyundai Motor Co. , is one of China's top five car makers in terms of sales volume, competing with the likes of Shanghai-based SAIC Motor, Wuhan-based Dongfeng Motor Group Co. , Guangzhou-based Guangzhou Automobile Group Co. and Chongqing Changan Automobile Co.

Total car sales under BAIC's homegrown brands such as the

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