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Red Flag limo returns in threat to Audi in Chinaâ€Ž

27 February 2012 15:28 (UTC +04:00)

Baku - APA-Economics. Chairman Mao Zedongâ€™s Red Flag limousine is making a comeback after a $280 million overhaul, seeking to regain its standing as the ride of Chinese leaders from Volkswagen AG (VOW)â€™s Audi, Bloomberg reported.

China FAW Group Corp. (CHFAWZ), which built the first Hongqi -- as the brand is known in Chinese -- for Mao in 1958, received state approval this month to make the C131, reviving the Red Flagâ€™s production after it was discontinued in 2010. The sedan will be the official car for minister-level officials, according to the Communist Partyâ€™s official Peopleâ€™s Daily website.

The endorsement may be a blow to Audi, which accounts for an estimated 30 percent of cars used by public servants, and illustrates the stateâ€™s efforts to protect domestic producers as they struggle to compete against VW and General Motors Co. China signaled last week it will stop buying foreign brands and in January ended some incentives on external investments.

â€œThe move is an indication that the government supports the homegrown auto industry,â€ said Klaus Paur, Shanghai-based head of auto research at Ipsos. â€œAudi has a long history as provider of government cars. Therefore, a substantial reduction of foreign brand purchases would impact Audi the most.â€

Ipsos estimates the government spends about $16 billion a year as Chinaâ€™s biggest buyer of cars, while China International Capital Corp. projects the amount to be closer to $13 billion.

Chinaâ€™s first carmaker plans to invest 1.98 billion yuan ($280 million) on the Red Flag and produce 30,000 C131s next year, according to the closely held carmaker. The Hongqi is part of ambitions by FAW -- which makes vehicles with General Motors Co. (GM), VW and Toyota Motor Corp. (7203) -- to double its own-brand vehicle sales to more than 2 million units by 2015.